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SHANGHAI, March 7, 2023 /PRNewswire/ -- Trip.com Group Limited (Nasdaq: TCOM; HKEX: 9961) ("Trip.com Group" or the "Company"), a leading one-stop travel service provider of accommodation reservation, transportation ticketing, packaged tours and corporate travel management, today announced its unaudited financial results for the fourth quarter and full year of 2022. Key Highlights for the Fourth Quarter and Full Year of 2022 The domestic business in China remained resilient and the international business continued to show strong recovery momentum.- Outbound air-ticket bookings and hotel bookings increased by over 200% and 140% year over year in the fourth quarter, respectively.- Overall air-ticket bookings on the Company's global platforms grew by 80% year over year in the fourth quarter. "The year of 2022 marks a turning point for the global travel industry, with most of the travel restrictions and quarantine requirements in China being lifted in December and the global travel industry maintaining its robust recovery," said James Liang, Executive Chairman. "During the fourth quarter, the European and the U.S. markets made further progress towards normalcy while the Asia market was quickly picking up the pace. We have seen rapid growth for China's outbound travel since the beginning of 2023, showing a strong pent-up demand for outbound travel. We are excited about the opportunities ahead and are well-prepared to capture demands across our major markets." "We are encouraged by our solid results in 2022 and strong recovery in the recent months," said Jane Sun, Chief Executive Officer. "Going forward, we will continue to focus on expanding our product coverage in scope and depth, and further improving our customer service quality in the global markets. Based on the solid foundation we have built over the past three years, we are confident that our company can grow at a faster pace across global markets as we continue to leverage our operational improvements." Fourth Quarter and Full Year of 2022 Financial Results and Business Updates The Company's domestic business was negatively impacted by the COVID-19 pandemic in the fourth quarter of 2022. Meanwhile, the Company's international business maintained its growth momentum as countries continued to open up and return to normalcy. For the fourth quarter of 2022, Trip.com Group reported net revenue of RMB5.0 billion (US$729 million), representing a 7% increase from the same period in 2021. Net revenue for the fourth quarter of 2022 decreased by 27% from the previous quarter primarily due to the surges of COVID-19 infections in certain regions of China and the seasonality in winter. For the full year of 2022, net revenue was RMB20.0 billion (US$2.9 billion), which remained flat comparing to that for 2021. Accommodation reservation revenue for the fourth quarter of 2022 was RMB1.7 billion (US$245 million), representing a 12% decrease from the same period in 2021 and a 42% decrease from the previous quarter, primarily due to the surges of COVID-19 infections in certain regions of China. For the full year of 2022, accommodation reservation revenue was RMB7.4 billion (US$1.1 billion), representing a 9% decrease from 2021. The accommodation reservation revenue accounted for 37% of the total revenue in 2022 and 41% of the total revenue in 2021. Transportation ticketing revenue for the fourth quarter of 2022 was RMB2.2 billion (US$320 million), representing a 45% increase from the same period in 2021 primarily due to the strong recovery of overseas market. Transportation ticketing revenue for the fourth quarter decreased by 16% from the previous quarter primarily due to the surges of COVID-19 infections in certain regions of China and the seasonality in winter. For the full year of 2022, transportation ticketing revenue was RMB8.3 billion (US$1.2 billion), representing a 20% increase from 2021. The transportation ticketing revenue accounted for 41% of the total revenue in 2022 and 34% of the total revenue in 2021. Packaged-tour revenue for the fourth quarter of 2022 was RMB164 million (US$24 million), representing a 7% decrease from the same period in 2021 and a 58% decrease from the previous quarter, primarily due to the surges of COVID-19 infections in certain regions of China. For the full year of 2022, packaged-tour revenue was RMB797 million (US$116 million), representing a 28% decrease from 2021. The packaged-tour revenue accounted for 4% of the total revenue in 2022 and 6% of the total revenue in 2021. Corporate travel revenue for the fourth quarter of 2022 was RMB277 million (US$40 million), representing a 25% decrease from the same period in 2021 and a 25% decrease from the previous quarter, primarily due to the surges of COVID-19 infections in certain regions of China. For the full year of 2022, corporate travel revenue was RMB1.1 billion (US$157 million), representing a 20% decrease from 2021. The corporate travel revenue accounted for 5% of the total revenue in 2022 and 7% of the total revenue in 2021. Cost of revenue for the fourth quarter of 2022 increased by 7% to RMB1.2 billion (US$174 million) from the same period in 2021 and decreased by 6% from the previous quarter. Cost of revenue as a percentage of net revenue was 24% for the fourth quarter of 2022. For the full year of 2022, cost of revenue was relatively stable at RMB4.5 billion (US$654 million) comparing to that for 2021, which accounted for 23% of net revenue. Product development expenses for the fourth quarter of 2022 decreased by 6% to RMB2.1 billion (US$305 million) from the same period in 2021 and decreased by 16% from the previous quarter, primarily due to a decrease in product development personnel related expenses. Product development expenses as a percentage of net revenue was 42% for the fourth quarter of 2022. For the full year of 2022, product development expenses decreased by 7% to RMB8.3 billion (US$1.2 billion) from 2021, which accounted for 42% of net revenue. Sales and marketing expenses for the fourth quarter of 2022 decreased by 12% to RMB1.1 billion (US$166 million) from the same period in 2021 and decreased by 20% from the previous quarter, primarily due to a decrease in expenses relating to sales and marketing promotion activities. Sales and marketing expenses as a percentage of net revenue was 23% for the fourth quarter of 2022. For the full year of 2022, sales and marketing expenses decreased by 14% to RMB4.3 billion (US$616 million) from 2021, which accounted for 21% of net revenue. General and administrative expenses for the fourth quarter of 2022 increased by 11% to RMB816 million (US$118 million) from the same period in 2021 primarily due to an increase in allowance for credit losses and decreased by 3% from the previous quarter. General and administrative expenses as a percentage of net revenue was 16% for the fourth quarter of 2022. For the full year of 2022, general and administrative expenses decreased by 3% to RMB2.8 billion (US$413 million) from 2021, which accounted for 14% of net revenue. Income tax expense for the fourth quarter of 2022 was RMB246 million (US$36 million), compared to RMB37 million for the same period in 2021 and RMB277 million for the previous quarter. The change in Trip.com Group's effective tax rate was primarily due to the combined impacts of changes in respective profitability of its subsidiaries with different tax rates, certain non-taxable income or loss resulting from the fair value changes in equity securities investments and exchangeable senior notes, and changes in valuation allowance provided for deferred tax assets. For the full year of 2022, income tax expense was RMB682 million (US$99 million), compared to RMB270 million in 2021. Net income for the fourth quarter of 2022 was RMB2.1 billion (US$301 million), compared to net loss of RMB883 million for the same period in 2021 and net income of RMB245 million for the previous quarter. Adjusted EBITDA for the fourth quarter of 2022 was RMB286 million (US$41 million), compared to RMB54 million for the same period in 2021 and RMB1.4 billion for the previous quarter. Adjusted EBITDA margin was 6% for the fourth quarter of 2022, compared to 1% for the same period in 2021 and 21% for the previous quarter. For the full year of 2022, net income was RMB1.4 billion (US$201 million), compared to net loss of RMB645 million in 2021. Net income attributable to Trip.com Group's shareholders for the fourth quarter of 2022 was RMB2.1 billion (US$298 million), compared to net loss attributable to Trip.com Group's shareholders of RMB834 million for the same period in 2021 and net income attributable to Trip.com Group's shareholders of RMB266 million for the previous quarter. Excluding share-based compensation charges, fair value changes of equity securities investments and exchangeable senior notes recorded in other income/(expense) and their tax effects, non-GAAP net income attributable to Trip.com Group's shareholders for the fourth quarter of 2022 was RMB498 million (US$71 million), compared to non-GAAP net income attributable to Trip.com Group's shareholders of RMB309 million for the same period in 2021 and non-GAAP net income attributable to Trip.com Group's shareholders of RMB1.0 billion for the previous quarter. For the full year of 2022, net income attributable to Trip.com Group's shareholders was RMB1.4 billion (US$206 million), compared to net loss attributable to Trip.com Group's shareholders of RMB550 million in 2021. Excluding share-based compensation charges and fair value changes of equity securities investments and exchangeable senior notes, non-GAAP net income attributable to Trip.com Group's shareholders was RMB1.3 billion (US$189 million) in 2022, compared to non-GAAP net income attributable to Trip.com Group's shareholders of RMB1.4 billion in 2021. Diluted earnings per ordinary share and per ADS was RMB3.12 (US$0.45) for the fourth quarter of 2022. Excluding share-based compensation charges, fair value changes of equity securities investments and exchangeable senior notes and their tax effects, non-GAAP diluted earnings per ordinary share and per ADS was RMB0.76 (US$0.11) for the fourth quarter of 2022. Each ADS currently represents one ordinary share of the Company. For the full year of 2022, diluted earnings per share and per ADS was RMB2.14 (US$0.31). Excluding share-based compensation charges and fair value changes of equity securities investments and exchangeable senior notes, non-GAAP diluted earnings per share and per ADS was RMB1.97 (US$0.29). As of December 31, 2022, the balance of cash and cash equivalents, restricted cash, short-term investment, held to maturity time deposit and financial products was RMB59.6 billion (US$8.6 billion). Conference Call Trip.com Group's management team will host a conference call at 7:00 PM EST on March 6, 2023 (or 8:00 AM CST on March 7, 2023) following this announcement. The conference call will be available live on Webcast and for replay at: https://investors.trip.com. The call will be archived for twelve months on our website. All participants must pre-register to join this conference call using the Participant Registration link below: https://register.vevent.com/register/BI79594cfcc5c549ce8496fb769efffb42. Upon registration, each participant will receive details for this conference call, including dial-in numbers and a unique access PIN. To join the conference, please dial the number provided, enter your PIN, and you will join the conference instantly. Safe Harbor Statement This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "may," "will," "expect," "anticipate," "future," "intend," "plan," "believe," "estimate," "is/are likely to," "confident" or other similar statements. Among other things, quotations from management in this press release, as well as Trip.com Group's strategic and operational plans, contain forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, severe or prolonged downturn in the global or Chinese economy, general declines or disruptions in the travel industry, the impact of COVID-19 pandemic to Trip.com Group's business operations, volatility in the trading price of Trip.com Group's ADSs or shares, Trip.com Group's reliance on its relationships and contractual arrangements with travel suppliers and strategic alliances, failure to compete against new and existing competitors, failure to successfully manage current growth and potential future growth, risks associated with any strategic investments or acquisitions, seasonality in the travel industry in the relevant jurisdictions where Trip.com Group operates, failure to successfully develop Trip.com Group's existing or future business lines, damage to or failure of Trip.com Group's infrastructure and technology, loss of services of Trip.com Group's key executives, adverse changes in economic and political policies of the PRC government, inflation in China, risks and uncertainties associated with PRC laws and regulations with respect to the ownership structure of the variable interest entities and the contractual arrangements among Trip.com Group, the variable interest entities and their shareholders, and other risks outlined in Trip.com Group's filings with the U.S. Securities and Exchange Commission or the Stock Exchange of Hong Kong Limited. All information provided in this press release and in the attachments is as of the date of the issuance, and Trip.com Group does not undertake any obligation to update any forward-looking statement, except as required under applicable law. About Non-GAAP Financial Measures To supplement Trip.com Group's unaudited condensed consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Trip.com Group uses non-GAAP financial information related to adjusted net income attributable to Trip.com Group Limited, adjusted EBITDA, adjusted EBITDA margin and adjusted diluted earnings per ordinary share and per ADS, each of which is adjusted from the most comparable GAAP result to exclude the share-based compensation charges that are not tax deductible, fair value changes of equity securities investments and exchangeable senior notes, net of tax, and other applicable items. Trip.com Group's management believes the non-GAAP financial measures facilitate better understanding of operating results from quarter to quarter and provide management with a better capability to plan and forecast future periods. Non-GAAP information is not prepared in accordance with GAAP, does not have a standardized meaning under GAAP, and may be different from non-GAAP methods of accounting and reporting used by other companies. The presentation of this additional information should not be considered a substitute for GAAP results. A limitation of using non-GAAP financial measures is that non-GAAP measures exclude share-based compensation charges, fair value changes of equity securities investments and exchangeable senior notes and their tax effects that have been and will continue to be significant recurring expenses in Trip.com Group's business for the foreseeable future. Reconciliations of Trip.com Group's non-GAAP financial data to the most comparable GAAP data included in the consolidated statement of operations are included at the end of this press release. About Trip.com Group Limited Trip.com Group Limited (Nasdaq: TCOM; HKEX: 9961) is a leading global one-stop travel platform, integrating a comprehensive suite of travel products and services and differentiated travel content. It is the go-to destination for travelers in China, and increasingly for travelers around the world, to explore travel, get inspired, make informed and cost-effective travel bookings, enjoy hassle-free on-the-go support, and share travel experience. Founded in 1999 and listed on Nasdaq in 2003 and HKEX in 2021, the Company currently operates under a portfolio of brands, including Ctrip, Qunar, Trip.com and Skyscanner, with the mission "to pursue the perfect trip for a better world." For further information, please contact: Investor RelationsTrip.com Group Limited Tel: +86 (21) 3406-4880 X 12229Email: iremail@trip.com Trip.com Group Limited Unaudited Consolidated Balance Sheets (In millions, except share and per share data) December 31, 2021 December 31, 2022 December 31, 2022 RMB (million) RMB (million) USD (million) ASSETS Current assets: Cash, cash equivalents and restricted cash 21,196 18,487 2,681 Short-term investments 29,566 25,545 3,703 Accounts receivable, net 4,649 5,486 795 Prepayments and other current assets 10,697 11,917 1,728 Total current assets 66,108 61,435 8,907 Property, equipment and software 5,534 5,204 755 Intangible assets and land use rights 13,046 12,825 1,859 Right-of-use asset 777 819 119 Investments (Includes held to maturity time deposit and financial products of RMB13,112 million and RMB15,527 million as of December 31,2021 and December 31, 2022, respectively) 44,961 50,177 7,275 Goodwill 59,353 59,337 8,603 Other long-term assets 396 570 83 Deferred tax asset 1,684 1,324 192 Total assets 191,859 191,691 27,793 LIABILITIES Current liabilities: Short-term debt and current portion of long-term debt 39,866 28,470 4,128 Accounts payable 6,019 7,569 1,097 Advances from customers 7,535 8,278 1,200 Other current liabilities 12,798 12,718 1,845 Total current liabilities 66,218 57,035 8,270 Deferred tax liability 3,527 3,487 506 Long-term debt 11,093 17,381 2,520 Long-term lease liability 400 534 77 Other long-term liabilities 165 235 34 Total liabilities 81,403 78,672 11,407 SHAREHOLDERS' EQUITY Total Trip.com Group Limited shareholders' equity 109,677 112,283 16,279 Non-controlling interests 779 736 107 Total shareholders' equity 110,456 113,019 16,386 Total liabilities and shareholders' equity 191,859 191,691 27,793 Trip.com Group Limited Unaudited Consolidated Statements of Income/(Loss) (In millions, except share and per share data) Three Months Ended Year Ended December 31, 2021 September 30, 2022 December 31, 2022 December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2022 RMB (million) RMB (million) RMB (million) USD (million) RMB (million) RMB (million) USD (million) Revenue: Accommodation reservation 1,919 2,904 1,689 245 8,148 7,400 1,073 Transportation ticketing 1,516 2,623 2,204 320 6,905 8,253 1,197 Packaged-tour 177 387 164 24 1,105 797 116 Corporate travel 367 370 277 40 1,347 1,079 157 Others 703 613 697 101 2,524 2,526 366 Total revenue 4,682 6,897 5,031 730 20,029 20,055 2,909 Less: Sales tax and surcharges (1) (5) (4) (1) (6) (16) (2) Net revenue 4,681 6,892 5,027 729 20,023 20,039 2,907 Cost of revenue (1,118) (1,271) (1,199) (174) (4,598) (4,513) (654) Gross profit 3,563 5,621 3,828 555 15,425 15,526 2,253 Operating expenses: Product development * (2,236) (2,491) (2,104) (305) (8,992) (8,341) (1,209) Sales and marketing * (1,298) (1,433) (1,148) (166) (4,922) (4,250) (616) General and administrative * (733) (843) (816) (118) (2,922) (2,847) (413) Total operating expenses (4,267) (4,767) (4,068) (589) (16,836) (15,438) (2,238) (Loss)/profits from operations (704) 854 (240) (34) (1,411) 88 15 Interest income 757 453 458 66 2,132 2,046 297 Interest expense (358) (395) (427) (62) (1,565) (1,514) (219) Other (expense)/income (433) (492) 2,745 398 373 2,015 292 (Loss)/income before income tax expense and equity in income of affiliates (738) 420 2,536 368 (471) 2,635 385 Income tax expense (37) (277) (246) (36) (270) (682) (99) Equity in (loss)/income of affiliates (108) 102 (210) (31) 96 (586) (85) Net (loss)/income (883) 245 2,080 301 (645) 1,367 201 Net loss/(income) attributable to non-controlling interests 49 21 (23) (3) 95 36 5 Net (loss)/income attributable to Trip.com Group Limited (834) 266 2,057 298 (550) 1,403 206 (Losses)/earnings per ordinary share - Basic (1.29) 0.41 3.17 0.46 (0.87) 2.17 0.31 - Diluted (1.29) 0.41 3.12 0.45 (0.87) 2.14 0.31 (Losses)/earnings per ADS - Basic (1.29) 0.41 3.17 0.46 (0.87) 2.17 0.31 - Diluted (1.29) 0.41 3.12 0.45 (0.87) 2.14 0.31 Weighted average ordinary shares outstanding - Basic 646,213,517 647,909,665 649,893,734 649,893,734 634,109,233 648,380,590 648,380,590 - Diluted 646,213,517 653,485,857 658,660,803 658,660,803 634,109,233 657,092,826 657,092,826 * Share-based compensation included in Operating expenses above is as follows: Product development 249 167 147 21 802 567 82 Sales and marketing 58 32 37 5 149 115 17 General and administrative 200 152 126 18 730 506 73 Trip.com Group Limited Unaudited Reconciliation of GAAP and Non-GAAP Results (In millions, except % and per share data) Three Months Ended Year Ended December 31, 2021 September 30, 2022 December 31, 2022 December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2022 RMB (million) RMB (million) RMB (million) USD (million) RMB (million) RMB (million) USD (million) Net (loss)/income (883) 245 2,080 301 (645) 1,367 201 Less: Interest income (757) (453) (458) (66) (2,132) (2,046) (297) Add: Interest expense 358 395 427 62 1,565 1,514 219 Add: Other expense/(income) 433 492 (2,745) (398) (373) (2,015) (292) Add: Income tax expense 37 277 246 36 270 682 99 Add: Equity in loss/(income) of affiliates 108 (102) 210 31 (96) 586 85 (Loss)/profit from operations (704) 854 (240) (34) (1,411) 88 15 Add: Share-based compensation 507 351 310 44 1,681 1,188 172 Add: Depreciation and amortization 251 214 216 31 1,021 875 127 Adjusted EBITDA 54 1,419 286 41 1,291 2,151 314 Adjusted EBITDA margin 1 % 21 % 6 % 6 % 6 % 11 % 11 % Net (loss)/income attributable to Trip.com Group Limited (834) 266 2,057 298 (550) 1,403 206 Add: Share-based compensation 507 351 310 44 1,681 1,188 172 Add: Loss/(gain) from fair value changes of equity securities investments and exchangeable senior notes 581 490 (1,945) (282) 170 (1,338) (194) Add: Tax effects on fair value changes of equity securities investments and exchangeable senior notes 55 (72) 76 11 55 41 5 Non-GAAP net income attributable to Trip.com Group Limited 309 1,035 498 71 1,356 1,294 189 Weighted average ordinary shares outstanding- Diluted-non GAAP 648,139,290 653,485,857 658,571,739 658,571,739 640,866,173 657,092,826 657,092,826 Non-GAAP Diluted earnings per share 0.48 1.58 0.76 0.11 2.12 1.97 0.29 Non-GAAP Diluted earnings per ADS 0.48 1.58 0.76 0.11 2.12 1.97 0.29 Notes for all the condensed consolidated financial schedules presented: Note 1: The conversion of Renminbi (RMB) into U.S. dollars (USD) is based on the certified exchange rate of USD1.00=RMB6.8972 on December 30, 2022 published by the Federal Reserve Board.
HONG KONG, March 3, 2023 /PRNewswire/ -- CLPS Incorporation (the "Company" or "CLPS") (Nasdaq: CLPS), today announced its unaudited financial results for the six months ended December 31, 2022, or the first half of the Company's fiscal year 2023. During this period, the global economy and international affair conditions have changed considerably, including the Federal Reserve interest rate hikes and changes in China's COVID conditions and policies, among others. This unprecedented chain of events had impacted both the macro and micro economies. The Company experienced direct and indirect effects on its business development, including the impact of exchange rate fluctuation between the RMB and the U.S. dollar since we are reporting in U.S. dollar term. The sluggish global economic growth partly caused by COVID-19 had impacted CLPS' clients in core markets, such as banking and e-commerce. Short term effects include clients cutting their budgets and reducing demand for IT services, which lessened the business growth opportunity for CLPS during the first half of fiscal year 2023. In addition, as part of China's COVID-19 epidemic prevention policy, the affected employees of CLPS were isolated, and those who were symptomatic could not work, leading to an increase in costs and a slowdown in revenue growth. In spite of this challenge, the Company responded by strengthening its client relationships, refining its management, expanding its client base actively, and providing support for its affected employees. As a result of rapid industry development and economic structure changes, IT professionals became more in demand, which pushed up compensation costs. Through the Talent Creation Program and Talent Development Program, CLPS was able to integrate education, training, and delivery, easing the pressure of this challenge. Through the development of its own projects enabled by advanced technology, extensive research, and understanding the needs of its clients, the Company has built a strong reputation in the industry, gained competitiveness, and boosted its bargaining power over the years. First Half of Fiscal 2023 Highlights (all results compared to the six months ended December 31, 2021) Revenues increased by 1.1% to $76.8 million from $75.9 million. Revenue from wealth management area increased by 24.3% to $18.8 million from $15.1 million. Revenue from automotive area increased by 29.7% to $6.5 million from $5.0 million. Revenue from the U.S. and Japan increased by 72.4% and 155.7%. Net cash provided by operating activities increased by 29.9% to $17.2 million from $13.2 million. Mr. Raymond Lin, Chief Executive Officer of CLPS, commented, "In the first half of fiscal year 2023, we maintained continued revenue growth and are well positioned to executing on our strategy to deliver solid financial performance for the rest of the fiscal year and beyond. We remained strong across our key markets, thanks to the trust and satisfaction our clients placed in us. As we sustained our competitive position in banking area, we also achieved growth in other core markets driven by the increased demand for IT services. The Company's capability in the automotive area makes us a reliable partner in China's burgeoning market for smart electric vehicles. Likewise, we continued to put our wealth management expertise to work, an area that remains lucrative in the financial industry and one in which several international banks have begun to navigate. Our global expansion strategy continued to pay off. In particular, our revenues from the U.S. and Japan increased by 72.4% and 155.7%, respectively. In 2022, we faced challenges due to macroeconomic factors, which we expect will cause some short-term headwinds this year. However, we recognize the opportunity in putting digital transformation initiatives at the forefront of our clients' strategy, and we are always ready to assist them in accelerating their business interactions and operations. CLPS is fully committed to delivering innovative products suited to the needs of our clients to offer them a full range of integrated services for their respective businesses, as well as enabling them to take digital transformation forward and achieve agile business management." Ms. Rui Yang, Chief Financial Officer of CLPS, commented, "CLPS ended the first half of fiscal year 2023 financial results on a solid note. Despite the effects of currency fluctuation in RMB against the U.S. dollar, we delivered a sustained revenue growth of 9.7% year-over-year in RMB term. In light of the volatile market, we continued to exercise prudence by strengthening our cash position. Our net cash provided by operating activities was up by 29.9% to $17.2 million in the first half of fiscal 2023, compared to $13.2 million in prior year period. Furthermore, we are pleased that we generated a net income of $1.4 million in the first half of fiscal 2023, from a net loss of $1.9 million in the second half of fiscal 2022. We also kicked off 2023 on a high note with CLPS's first special cash dividend payout. The Board also intends to declare dividend in the future depending on the Company's financial performance and results of operation. Despite the short-term challenges we faced, we remained confident in our ability to achieve continued growth and maximum shareholder value over the long term." First Half of Fiscal year 2023 Financial Results Revenues In the first half of fiscal 2023, revenues increased by $0.9 million, or 1.1%, to $76.8 million from $75.9 million in the prior year period. This increase in revenue was mainly due to an increase in revenue from IT consulting services. Revenues by Service Revenue from IT consulting services increased by $0.8 million, or 1.2%, to $72.8 million in the first half of fiscal year 2023 from $72.0 million in the prior year period. Revenue from IT consulting services accounted for 94.9% of total revenue, compared to 94.8% in the prior year period. The increase was due to the increased demand from existing and new clients, and our improved service delivery capability. Revenue from customized IT solution services decreased by $0.1 million, or 2.3%, to $3.2 million in the first half of fiscal 2023 from $3.3 million in the prior year period. Revenue from customized IT solution services accounted for 4.1% of total revenue, compared to 4.3% in the prior year period. The decrease was primarily due to the effect of currency fluctuation in RMB against the U.S. dollar. Revenue from other services increased by $0.1 million, or 11.4%, to $0.8 million in the first half of fiscal year 2023 from $0.7 million in the prior year period. Revenue from other services accounted for 1.0% of total revenue, compared to 0.9% in the prior year period. The increase was primarily due to the increased demand for other services, including non-IT consulting service. Revenues by Operational Areas Revenue from banking area decreased by $2.9 million, or 8.2%, to $32.2 million in the first half of fiscal 2023, from $35.1 million in the prior year period. Revenue from banking area accounted for 42.0% and 46.2% of total revenues in the first half of fiscal 2023 and 2022, respectively. Revenue from wealth management area increased by $3.7 million, or 24.3%, to $18.8 million in the first half of fiscal 2023, from $15.1 million in the prior year period. Revenue from wealth management area accounted for 24.5% and 19.9% of total revenues in the first half of fiscal 2023 and 2022, respectively. Revenue from e-Commerce area decreased by $0.7 million, or 4.8%, to $13.7 million in the first half of fiscal 2023, from $14.4 million in the prior year period. Revenue from e-Commerce area accounted for 17.9% and 19.0% of total revenues in the first half of fiscal 2023 and 2022, respectively. Revenue from automotive area increased by $1.5 million, or 29.7%, to $6.5 million in the first half of fiscal 2023, from $5.0 million in the prior year period. Revenue from automotive area accounted for 8.5% and 6.6% of total revenues in the first half of fiscal 2023 and 2022, respectively. Revenues by Geography Revenue generated outside of Mainland China was $7.2 million in the first half of fiscal year 2023, compared to $7.7 million in the same period of the previous year. Gross Profit Gross profit was $18.5 million in the first half of fiscal 2023, compared to $22.3 million in the prior year period. Operating Expenses Selling and marketing expenses increased by $0.4 million, or 17.5%, to $2.7 million in the first half of fiscal 2023 from $2.3 million in the prior year period. As a percentage of total revenues, selling and marketing expenses increased to 3.5% in the first half of fiscal 2023 compared to 3.0% in the prior year period. The increase was primarily due to the sales and marketing personnel-related expenses. Research and development expenses increased by $0.2 million, or 4.4%, to $4.4 million in the first half of fiscal 2023 from $4.2 million in the prior year period. As a percentage of total revenues, research and development expenses increased to 5.7% in the first half of fiscal 2023 compared to 5.5% in the prior year period. The increase was primarily due to the increased research and development personnel related expenses which enabled the Company's continued research and development efforts in new projects such as CAKU 2.0 and new generation of loan system. General and administrative expenses increased by $1.5 million, or 16.6%, to $10.7 million in the first half of fiscal 2023 from $9.2 million in the prior year period. As a percentage of total revenues, general and administrative expenses increased to 13.9% in the first half of fiscal 2023 compared to 12.1% in the prior year period. The increase was primarily due to hiring of management-level employees to further drive our growth in the overseas market, the year-over-year increase in employee salary, and the increase in depreciation and amortization resulting from the acquisition of fixed assets in Hong Kong and Singapore. Operating Income Operating income was $1.3 million in the first half of fiscal 2023, compared to $7.6 million in the same period of the previous year. Other Income and Expenses Total other income, net of other expenses was $0.2 million in the first half of fiscal 2023, compared to $0.2 million total other expenses, net of other income in the prior year period. Provision for Income Taxes Provision for income taxes decreased by $0.7 million to $0.2 million in the first half of fiscal 2023 from $0.9 million in the same period of the previous year, mainly due to the decrease in income before taxes. Net Income Net income was $1.4 million in the first half of fiscal 2023, compared to $6.5 million in the prior year period. Net income attributable to CLPS Incorporation's shareholders in the first half of fiscal 2023 was $1.3 million, compared to $6.3 million in the prior year period. Cash Flow As of December 31, 2022, the Company had cash and cash equivalents of $37.6 million compared to $18.4 million as of June 30, 2022. Net cash provided by operating activities was approximately $17.2 million. Net cash used in investing activities was approximately $0.2 million. Net cash provided by financing activities was approximately $2.5 million. The effect of exchange rate change on cash was approximately negative $0.3 million. The Company believes that its current cash position and cash flow from operations are sufficient to meet its anticipated cash needs for at least the next 12 months. Financial Outlook Undeterred by the short-term challenges mentioned above, we remain confident about our long-term business growth. For fiscal year 2023, the Company expects, considering our financial numbers could be affected by the floating exchange rate, and absent material acquisitions or non-recurring transactions, total sales growth was adjusted in the range of approximately 5% to 10%, and net income growth in the range of approximately 7% to 12% compared to fiscal year 2022 financial results. This forecast reflects the Company's current and preliminary views, which are subject to change and are subject to risks and uncertainties, including, but not limited to various risks and uncertainties facing the Company's business and operations as identified in its public filings. Exchange Rate The balance sheet amounts with the exception of equity as of December 31, 2022, were translated at 6.8972 RMB to 1.00 USD compared to 6.6981 RMB to 1.00 USD as of June 30, 2022. The equity accounts were stated at their historical rate. The average translation rates applied to the income statements accounts for the periods ended December 31, 2022 and 2021 were 6.9789 RMB to 1.00 USD and 6.4316 RMB to 1.00 USD, respectively. The change in the value of the RMB relative to the U.S. dollar may affect our financial results reported in the U.S. dollar terms without giving effect to any underlying change in our business or results of operation. Conference Call Information The Company will hold a conference call at 8:30 am ET on March 3, 2023 to discuss first half of fiscal 2023 results. Listeners may access the call by dialing: U.S. Toll-Free: +1-877-423-9813 U.S. Local /International: +1-201-689-8573 Mainland China: 400 120 2840 Hong Kong: 800 965 561 Listeners may also click this Call me™ link, which will be available 15 minutes prior to scheduled start time for instant telephone access. To access the live webcast of the conference call, please visit this link. The live and archived webcast will also be available through the Company's investor relations website at https://ir.clpsglobal.com. A replay of the call will be available through March 17, 2023 by dialing: U.S. Toll-Free: +1-844-512-2921 U.S. Local/International: +1-412-317-6671 Passcode: 13736594 About CLPS Incorporation Headquartered in Hong Kong, CLPS Incorporation (the "Company") (Nasdaq: CLPS) is a global leading information technology ("IT"), consulting and solutions service provider focusing on the banking, insurance and financial sectors. The Company serves as an IT solutions provider to a growing network of clients in the global financial industry, including large financial institutions in the US, Europe, Australia, Southeast Asia and Hong Kong, and their PRC-based IT centers. The Company maintains 19 delivery and/or research & development centers to serve different customers in various geographic locations. Mainland China centers are located in Shanghai, Beijing, Dalian, Tianjin, Xi'an, Chengdu, Guangzhou, Shenzhen, Hangzhou, and Hainan. The remaining nine global centers are located in Hong Kong SAR, USA, Japan, Singapore, Australia, Malaysia, India, the Philippines and Vietnam. For further information regarding the Company, please visit: https://ir.clpsglobal.com/, or follow CLPS on Facebook, LinkedIn, and Twitter. Forward-Looking Statements Certain of the statements made in this press release are "forward-looking statements" within the meaning and protections of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to the Company's beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond the Company's control, and which may cause the actual results, performance, capital, ownership or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All such statements attributable to us are expressly qualified in their entirety by this cautionary notice, including, without limitation, those risks and uncertainties related to the Company's financial and operational performance in the first half of fiscal 2023, its expectations of the Company's future performance, its preliminary outlook and guidance offered in this presentation, as well as the risks and uncertainties described in the Company's most recently filed SEC reports and filings. Such reports are available upon request from the Company, or from the Securities and Exchange Commission, including through the SEC's Internet website at http://www.sec.gov. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date hereof, or after the respective dates on which any such statements otherwise are made. Use of Non-GAAP Financial Measures The unaudited condensed consolidated financial information is prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"), except that the consolidated statement of changes in shareholders' equity, consolidated statements of cash flows, and the detailed notes have not been presented. The Company uses non-GAAP operating income, non-GAAP operating margin, non-GAAP net income attributable to CLPS Incorporation's shareholders, and basic and diluted non-GAAP net income per share, which are non-GAAP financial measures. Non-GAAP operating income is operating income excluding share-based compensation expenses. Non-GAAP operating margin is non-GAAP operating income as a percentage of revenues. Non-GAAP net income attributable to CLPS Incorporation's shareholders is net income attributable to CLPS Incorporation's shareholders excluding share-based compensation expenses. Basic and diluted non-GAAP net income per share is non-GAAP net income attributable to common shareholders divided by weighted average number of shares used in the calculation of basic and diluted net income per share. The Company believes that separate analysis and exclusion of the non-cash impact of share-based compensation expenses clarity to the constituent parts of its performance. The Company reviews these non-GAAP financial measures together with GAAP financial measures to obtain a better understanding of its operating performance. It uses the non-GAAP financial measure for planning, forecasting and measuring results against the forecast. The Company believes that non-GAAP financial measure is useful supplemental information for investors and analysts to assess its operating performance without the effect of non-cash share-based compensation expenses, which have been and will continue to be significant recurring expenses in its business. However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact the Company's net income for the period. In addition, because non-GAAP financial measures are not measured in the same manner by all companies, they may not be comparable to other similar titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial measure prepared in accordance with U.S. GAAP. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, or as a substitute for, the financial information prepared and presented in accordance with U.S. GAAP. The Company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business. For more information on these non-GAAP financial measures, please see the table captioned "Unaudited Reconciliations of Non-GAAP and GAAP Results" near the end of this release. Contact: CLPS IncorporationRhon GalichaInvestor Relations OfficePhone: +86-182-2192-5378Email: ir@clpsglobal.com CLPS INCORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in U.S. dollars ("$"), except for number of shares) As of December 31, June 30, 2022 2022 (Unaudited) (Audited) ASSETS Current assets: Cash and cash equivalents 37,551,244 18,396,987 Accounts receivable, net 45,048,831 53,769,887 Prepayments, deposits and other assets, net 2,963,071 4,215,414 Amounts due from related parties 429,369 377,642 Total Current Assets 85,992,515 76,759,930 Non-Current assets: Property and equipment, net 20,430,216 20,601,098 Intangible assets, net 920,605 970,044 Goodwill 2,412,933 2,363,841 Long-term investments 566,522 610,386 Prepayments, deposits and other assets, net 289,422 248,456 Deferred tax assets, net 305,258 327,040 Operating lease right-of-use assets 1,282,906 - Total Assets 112,200,377 101,880,795 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank loans 16,592,357 14,474,363 Accounts payable 397,437 343,597 Accrued expenses and other current liabilities 363,782 352,402 Tax payables 2,505,813 2,355,066 Contract liabilities 2,247,687 587,140 Salaries and benefits payable 14,928,223 12,203,933 Amount due to related parties 37,034 66,884 Operating lease liabilities, current 1,033,044 - Total Current Liabilities 38,105,377 30,383,385 Non-Current liabilities: Deferred tax liabilities 142,921 150,547 Operating lease liabilities, non-current 375,636 - Other non-current liabilities 3,202,410 3,546,263 TOTAL LIABILITIES 41,826,344 34,080,195 Commitments and Contingencies Shareholders' Equity Common stock, $0.0001 par value, 100,000,000 shares authorized; 23,626,122 shares issued and outstanding as of December 31, 2022; 22,444,822 shares issued and outstanding as of June 30, 2022 2,363 2,244 Additional paid-in capital 57,648,162 55,705,209 Statutory reserves 6,498,218 5,071,876 Retained earnings 6,138,216 6,323,792 Accumulated other comprehensive losses (1,261,753) (550,248) Total CLPS Incorporation's Shareholders' Equity 69,025,206 66,552,873 Noncontrolling Interests 1,348,827 1,247,727 Total Shareholders' Equity 70,374,033 67,800,600 Total Liabilities and Shareholders' Equity 112,200,377 101,880,795 CLPS INCORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS of INCOME AND COMPREHENSIVE INCOME (Amounts in U.S. dollars ("$"), except for number of shares) For the six months ended December 31, 2022 2021 Revenues 76,760,811 75,921,605 Less: Cost of revenues (note 1) (58,299,928) (53,609,609) Gross profit 18,460,883 22,311,996 Operating income (expenses): Selling and marketing expenses (note 1) 2,684,075 2,284,404 Research and development expenses 4,359,214 4,175,373 General and administrative expenses (note 1) 10,694,588 9,168,389 Subsidies and other operating income (620,702) (878,083) Total operating expenses 17,117,175 14,750,083 Income from operations 1,343,708 7,561,913 Other income 399,917 295,704 Other expenses (183,695) (475,269) Income before income tax and share of income (loss) in equity investees 1,559,930 7,382,348 Provision for income taxes 185,196 864,921 Income before share of income (loss) in equity investees 1,374,734 6,517,427 Share of income (loss) in equity investees, net of tax 22,577 (47,082) Net income 1,397,311 6,470,345 Less: Net income attributable to noncontrolling interests 129,881 207,881 Net income attributable to CLPS Incorporation's shareholders 1,267,430 6,262,464 Other comprehensive income (loss) Foreign currency translation (loss) income (746,569) 500,376 Less: foreign currency translation (loss) income attributable tononcontrolling interest (35,064) 15,308 Other comprehensive (loss) income attributable to CLPSIncorporation's shareholders (711,505) 485,068 Comprehensive income attributable to CLPS Incorporation's shareholders 555,925 6,747,532 Comprehensive income attributable to noncontrolling interests 94,817 223,189 Comprehensive income 650,742 6,970,721 Basic earnings per common share* 0.05 0.31 Weighted average number of share outstanding – basic 23,626,122 20,374,035 Diluted earnings per common share* 0.05 0.31 Weighted average number of share outstanding – diluted 23,643,457 20,457,630 Note: (1) Includes share-based compensation expenses as follows: Cost of revenues 11,071 22,923 Selling and marketing expenses 60,091 109,375 General and administrative expenses 1,871,910 2,335,803 1,943,072 2,468,101 * The shares and per share data are presented on a retroactive basis to reflect the nominal share issuance. CLPS INCORPORATION UNAUDITED RECONCILIATION OF NON-GAAP AND GAAP RESULTS (Amounts in U.S. dollars ("$"), except for number of shares) For the six months ended December 31, 2022 2021 Cost of revenues 58,299,928 53,609,609 Less: share-based compensation expenses 11,071 22,923 Non-GAAP cost of revenues 58,288,857 53,586,686 Selling and marketing expenses 2,684,075 2,284,404 Less: share-based compensation expenses 60,091 109,375 Non-GAAP selling and marketing expenses 2,623,984 2,175,029 General and administrative expenses 10,694,588 9,168,389 Less: share-based compensation expenses 1,871,910 2,335,803 Non-GAAP general and administrative expenses 8,822,678 6,832,586 Operating income 1,343,708 7,561,913 Add: share-based compensation expenses 1,943,072 2,468,101 Non-GAAP operating income 3,286,780 10,030,014 Operating Margin 1.8 % 10.0 % Add: share-based compensation expenses 2.5 % 3.2 % Non-GAAP operating margin 4.3 % 13.2 % Net income 1,397,311 6,470,345 Add: share-based compensation expenses 1,943,072 2,468,101 Non-GAAP net income 3,340,383 8,938,446 Net income attributable to CLPS Incorporation's shareholders 1,267,430 6,262,464 Add: share-based compensation expenses 1,943,072 2,468,101 Non-GAAP net income attributable to CLPS Incorporation's shareholders 3,210,502 8,730,565 Weighted average number of share outstanding used in computing GAAP and non-GAAP basic earnings 23,626,122 20,374,035 GAAP basic earnings per common share 0.05 0.31 Add: share-based compensation expenses 0.09 0.12 Non-GAAP basic earnings per common share 0.14 0.43 Weighted average number of share outstanding used in computing GAAP diluted earnings 23,643,457 20,457,630 Weighted average number of share outstanding used in computing non-GAAP diluted earnings 23,643,457 20,457,630 GAAP diluted earnings per common share 0.05 0.31 Add: share-based compensation expenses 0.09 0.12 Non-GAAP diluted earnings per common share 0.14 0.43
SANTA CLARA, Calif., March 2, 2023 /PRNewswire/ -- Tuya Inc. ("Tuya" or the "Company", together with its subsidiaries and consolidated affiliated entities, the "Group") (NYSE: TUYA; HKEX: 2391), a global leading IoT cloud development platform, today announced its unaudited financial results for the fourth quarter and full fiscal year ended December 31, 2022. Fourth Quarter 2022 Financial Highlights Total revenue was US$45.3 million, down approximately 39.6% year over year (4Q2021: US$75.0 million). IoT platform-as-a-service ("PaaS") revenue was US$32.6 million, down approximately 47.4% year over year (4Q2021: US$62.1 million). Software-as-a-service ("SaaS") and others revenue was US$7.9 million, up approximately 8.7% year over year (4Q2021: US$7.3 million). Overall gross margin for the quarter increased to 44.6%, up 1.4 percentage points year over year (4Q2021: 43.2%). Gross margin of IoT PaaS for the quarter decreased to 41.5%, down 1.0 percentage point year over year (4Q2021: 42.5%). Operating expenses for the quarter were US$53.0 million, down approximately 36.8% year over year (4Q2021: US$83.9 million). Non-GAAP operating expenses for the quarter were US$35.5 million, down approximately 46.4% year over year (4Q2021: US$66.3 million). Operating margin for the quarter was negative 72.5%, down 3.7 percentage points year over year (4Q2021: negative 68.8%). Non-GAAP operating margin for the quarter was negative 33.8%, up 11.5 percentage points year over year (4Q2021: negative 45.3%). Net cash used in operating activities for the quarter was US$0.1 million, down approximately 99.7% year over year (4Q2021: US$53.2 million). Total cash and cash equivalents, and short-term investments were US$954.3 million as of December 31, 2022, compared to US$945.9 million as of September 30, 2022 and US$1.07 billion as of December 31, 2021. Total shares repurchased in the form of American Depositary Shares ("ADSs") and Class A ordinary shares amounted to approximately 25.8 million for a total consideration of approximately US$112.8 million as of December 31, 2022. Full Year 2022 Financial Highlights Total revenue was US$208.2 million, down approximately 31.1% year over year (2021: US$302.1 million). IoT PaaS revenue was US$152.9 million, down approximately 41.5% year over year (2021: US$261.4 million). SaaS and others revenue was US$29.8 million, up approximately 60.6% year over year (2021: US$18.6 million). Overall gross margin for the year increased to 43.0%, up 0.7 percentage point year over year (2021: 42.3%). Gross margin of IoT PaaS for the year decreased to 41.1%, down 1.3 percentage points year over year (2021: 42.4%). Operating expenses for the year were US$257.6 million, down approximately 17.3% year over year (2021: US$311.4 million). Non-GAAP operating expenses for the year were US$188.6 million, down approximately 23.1% year over year (2021: US$245.3 million). Operating margin for the year was negative 80.8%, down 20.0 percentage points year over year (2021: negative 60.8%). Non-GAAP operating margin for the year was negative 47.6%, down 8.7 percentage points year over year (2021: negative 38.9%). Net cash used in operating activities for the year was US$70.7 million, down approximately 44.0% year over year (2021: US$126.1 million). Fourth Quarter and Fiscal Year 2022 Operating Highlights IoT PaaS customers[1] for the fourth quarter and the fiscal year 2022 were approximately 2,400 and 5,100, respectively (4Q2021 and 2021: approximately 3,300 and 5,500, respectively). Total customers for the fourth quarter and the fiscal year 2022 were approximately 3,400 and 7,600, respectively (4Q2021 and 2021: approximately 4,800 and 8,400, respectively). The Group's implementation of its key-account strategy enabled it to be more focused on serving strategic customers. Premium IoT PaaS customers[2] for the trailing 12 months ended December 31, 2022 were 263 (4Q2021: 311). In the fourth quarter and the fiscal year 2022, the Group's premium IoT PaaS customers contributed approximately 77.0% and 81.7% of its IoT PaaS revenue, respectively (4Q2021 and 2021: approximately 87.3% and 88.6%, respectively). Dollar-based net expansion rate ("DBNER")[3] of IoT PaaS for the trailing 12 months ended December 31, 2022 was 51% (4Q2021: 153%). Registered IoT device and software developers, or registered developers, were over 708,000 as of December 31, 2022, up 38.8% from approximately 510,000 developers as of December 31, 2021. 1. The Group defines an IoT PaaS customer for a given period as a customer who has directly placed orders for IoT PaaS with the Group during that period. 2. The Group defines a premium IoT PaaS customer as a customer as of a given date that contributed more than US$100,000 of IoT PaaS revenue during the immediately preceding 12-month period. 3. The Group calculates DBNER of IoT PaaS for a trailing 12-month period by first identifying all customers in the prior 12-month period (i.e., those have placed at least one order for IoT PaaS during that period), and then calculating the quotient from dividing the IoT PaaS revenue generated from such customers in the current trailing 12-month period by the IoT PaaS revenue generated from the same group of customers in the prior 12-month period. The Group's DBNER may change from period to period, due to a combination of various factors, including changes in the customers' purchase cycles and amounts and the Group's customer mix, among other things. DBNER indicates the Group's ability to expand customer use of the Tuya platform over time and generate revenue growth from existing customers. Mr. Xueji (Jerry) Wang, Founder and Chief Executive Officer of Tuya, commented, "We have responded swiftly and decisively to macroeconomic headwinds, including high inflation and downstream destocking, recreating our company to be stronger and more resilient than ever. We have taken bold steps to optimize our product offerings, streamline our operations, and reduce our expenses. In particular, our recalibrated focus on key account customers and our sales triangle strategy enabled us to better meet the diverse needs of large customers while improving our service efficiency. Looking ahead, we are confident that our strengthened value proposition, improved cost and expense structure, and substantial cash position will enable us to capitalize on emerging opportunities in 2023 and beyond. We are committed to our mission of driving innovation and delivering value to our customers, and we're confident in the long-term prospects of our business." Ms. Yao (Jessie) Liu, Director and Chief Financial Officer of Tuya, added, "Reflecting on 2022 performance, we acknowledge the impact of weakening sales of consumer products, our core market. We responded proactively by reducing headcount and optimizing our cost structure, which resulted in improved margins and minimal cash use. Notably, we achieved a 46.4% reduction in non-GAAP total operating expenses in the fourth quarter of 2022, marking our fifth consecutive quarter with substantial operating expense reductions. Our success in controlling expenses and improving efficiency has allowed us to achieve our lowest quarterly non-GAAP net loss since the start of 2019." Fourth Quarter 2022 Unaudited Financial Results REVENUE Total revenue in the fourth quarter of 2022 decreased by 39.6% to US$45.3 million from US$75.0 million in the same period of 2021, mainly due to the decreases in IoT PaaS revenue and smart device distribution revenue, partially offset by the increase in SaaS and others revenue. More particularly: IoT PaaS revenue in the fourth quarter of 2022 decreased by 47.4% to US$32.6 million from US$62.1 million in the same period of 2021. During the quarter, the Group's customers remained conservative with their purchases as a result of (i) continued global inflation and the consequent weakened consumer spending, (ii) heavy inventory backlog in the supply chain caused by the mismatch in supply and demand in the consumer discretionary sector amid such continued inflation, which is expected to be consumed by the downstream over time, and (iii) an adverse impact of US$2.9 million due to foreign exchange rate fluctuation. In addition, during the quarter, the Group's operating and selling and marketing activities were impacted by the COVID-19 in China. As a result of these factors, the Group's DBNER of IoT PaaS for the trailing 12 months ended December 31, 2022 decreased to 51% compared to previous periods. SaaS and others revenue in the fourth quarter of 2022 increased by 8.7% to US$7.9 million from US$7.3 million in the same period of 2021. During the quarter, the Group continued to making efforts in offer value-added services ("VAS") and various software products with strong value proposition to its customers. On the other hand, the Group upgraded its customer service systems and reformed its service force in order to better utilize limited resources to acquire key accounts and provide more targeted services to different customers, which as a result partially slowed down the momentum of certain services, such as "OEM APP", compared to the same period in 2021. Smart device distribution revenue in the fourth quarter of 2022 decreased by 16.0% to US$4.7 million from US$5.6 million in the same period of 2021. Changes in the Group's smart device distribution revenue between periods were primarily due to the varying timing and amounts of customer demands and purchases. COST OF REVENUE Cost of revenue in the fourth quarter of 2022 decreased by 41.1% to US$25.1 million from US$42.6 million in the same period of 2021, in line with the decrease in total revenue. GROSS PROFIT AND GROSS MARGIN Total gross profit in the fourth quarter of 2022 decreased by 37.6% to US$20.2 million from US$32.4 million in the same period of 2021 and gross margin percentage increased to 44.6% in the fourth quarter of 2022 from 43.2% in the same period of 2021. IoT PaaS gross margin in the fourth quarter of 2022 was 41.5%, compared to 42.5% in the same period of 2021, primarily due to the changes in product mix and a negative 1.6 percentage points impact caused by accrued inventory allowance of certain slow-moving IoT chips and raw materials in relation to the IoT PaaS business during the quarter. SaaS and others gross margin in the fourth quarter of 2022 was 75.2%, compared to 73.4% in the fourth quarter of 2021. Smart device distribution gross margin in the fourth quarter of 2022 was 14.6%, compared to 10.6% in the fourth quarter of 2021. OPERATING EXPENSES Operating expenses decreased by 36.8% to US$53.0 million in the fourth quarter of 2022 from US$83.9 million in the same period of 2021. Non-GAAP operating expenses, defined as operating expenses excluding share-based compensation expenses, decreased by 46.4% to US$35.5 million in the fourth quarter of 2022 from US$66.3 million in the same period of 2021. Share-based compensation expenses in the fourth quarter of 2022 were US$17.5 million, basically flat year over year. Research and development expenses in the fourth quarter of 2022 were US$27.8 million, down 39.8% from US$46.2 million in the same period of 2021, as the Group continues to strategically streamline its research and development team and operations. During this quarter, average salaried employee headcount of the Group's research and development team was down approximately 48.1% year over year, compared to the same quarter in last year. Sales and marketing expenses in the fourth quarter of 2022 were US$11.2 million, down 39.2% from US$18.4 million in the same period of 2021, primarily because of (i) the strategic streamlining of the Group's sales and marketing team, and (ii) the decrease in marketing spending due to COVID-19 and the Group's efforts to control expenditure and improve sales and marketing efficiency. General and administrative expenses in the fourth quarter of 2022 were US$16.2 million, down 23.0% from US$21.0 million in the same period of 2021, primarily due to Company's efforts to control professional expenditures. Other operating income, net in the fourth quarter of 2022 was US$2.2 million, primarily due to the receipts of software value-added tax ("VAT") refunds and various general subsidies for enterprises. LOSS FROM OPERATIONS AND OPERATING MARGIN Loss from operations in the fourth quarter of 2022 narrowed by 36.3% to US$32.8 million from US$51.6 million in the same period of 2021. Non-GAAP loss from operations in the fourth quarter of 2022 narrowed by 54.8% to US$15.3 million from US$33.9 million in the same period of 2021. Operating margin in the fourth quarter of 2022 was negative 72.5%, down 3.7 percentage points from negative 68.8% in the same period of 2021 as the Group's total revenue declined at a faster pace than operating expenses. Non-GAAP operating margin in the fourth quarter of 2022 was negative 33.8%, up 11.5 percentage points from negative 45.3% in the same period of 2021. NET LOSS AND NET MARGIN Net loss was US$22.7 million in the fourth quarter of 2022, compared to US$48.8 million in the same period of 2021. Non-GAAP net loss was US$5.2 million in the fourth quarter of 2022, compared to US$31.2 million in the same period of 2021. The difference between loss from operations and net loss in the fourth quarter of 2022 was primarily because of a US$10.2 million financial income achieved mainly due to well implemented treasury strategies on the Group's cash and deposits recorded as short-term investment. Net margin in the fourth quarter of 2022 was negative 50.2%, up 15.0 percentage points from negative 65.2% in the same period of 2021. Non-GAAP net margin in the fourth quarter of 2022 was negative 11.5%, up 30.1 percentage points from negative 41.6% in the same period of 2021. BASIC AND DILUTED NET LOSS PER ADS Basic and diluted net loss per ADS was US$0.04 in the fourth quarter of 2022, compared to US$0.09 in the same period of 2021. Each ADS represents one Class A ordinary share. Non-GAAP basic and diluted net loss per ADS was US$0.01 in the fourth quarter of 2022, compared to US$0.06 in the same period of 2021. CASH AND CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS Cash and cash equivalents, and short-term investments were US$954.3 million as of December 31, 2022, up US$8.4 million from US$945.9 million quarter over quarter, which the Group believes is sufficient to meet its current liquidity and working capital needs. NET CASH USED IN OPERATING ACTIVITIES Net cash used in operating activities for the fourth quarter of 2022 was US$0.1 million, or 0.3% of total revenue, compared to US$53.2 million, or 71.0% of total revenue in the fourth quarter of 2021. The net cash used in operating activities in the fourth quarter of 2022 improved mainly due to the significant decrease in operating expenses, particularly employee-related costs, and working capital changes in the ordinary course of business. SHARE REPURCHASE During the quarter ended December 31, 2022, the Group repurchased approximately 2.8 million of ADSs and Class A ordinary shares from the open market, for a total consideration of approximately US$4.2 million, subject to the relevant regulation on the volume of share repurchases. As of December 31, 2022, total shares repurchased in the form of ADSs and Class A ordinary shares amounted to approximately 25.8 million for a total consideration of approximately US$112.8 million. Fiscal Year 2022 Unaudited Financial Results REVENUE Total revenue in 2022 decreased by 31.1% to US$208.2 million from US$302.1 million in the same period of 2021, mainly due to the decrease in IoT PaaS revenue, partially offset by the increase in smart device distribution revenue and SaaS and others revenue. IoT PaaS revenue in 2022 decreased by 41.5% to US$152.9 million from US$261.4 million in 2021, primarily because the Group's customers have become more prudent and conservative in their purchases as the increasing inflation globally, especially in North America and Europe, resulted in weakened discretionary consumer spending. In addition, revenue was adversely impacted by heavy inventory backlog in the supply chain caused by the mismatch in supply and demand in the consumer discretionary sector amid such continued inflation, which is expected to be consumed by the downstream over time. Moreover, foreign exchange rate fluctuations negatively impacted the Group's IoT PaaS revenue in the year by 2.4 percentage points, and the change in COVID-19 situation and its related public prevention policy during the year also has affected the Group's selling, marketing and operating activities across the globe. As a result of these factors, the Group's DBNER of IoT PaaS for the trailing 12 months ended December 31, 2022 decreased to 51% compared to previous periods. SaaS and others revenue in 2022 increased by 60.6% to US$29.8 million from US$18.6 million in 2021, sustaining a strong year-over-year growth momentum. During the year, the Group continued to making efforts in offer value-added services ("VAS") and various software products with strong value proposition to its customers. Smart device distribution revenue in 2022 increased by 14.9% to US$25.4 million from US$22.2 million in 2021. The Group offers smart device distribution mainly to save customers (primarily brands, system integrators and industry operators who demand and purchase finished smart devices) from dealing with multiple original equipment manufacturers ("OEMs"). Changes in the Group's smart device distribution revenue between periods are primarily attributable to the varying timing and amounts of customer demands and purchases. COST OF REVENUE Cost of revenue in 2022 decreased by 31.8% to US$118.7 million from US$174.2 million in 2021, in line with the decrease in total revenue. GROSS PROFIT AND GROSS MARGIN Total gross profit in 2022 decreased by 30.1% to US$89.4 million from US$127.9 million in 2021 and gross margin percentage increased to 43.0% in 2022 from 42.3% in 2021. IoT PaaS gross margin in 2022 was 41.1%, down 1.3 percentage points compared to 42.4% in 2021, primarily due to a negative 2.4 percentage points impact caused by an accrual of US$3.7 million in inventory allowance of certain slow-moving IoT chips and raw materials in relation to the IoT PaaS business during the year. Excluding inventory allowance impacts, the Group's effective implementation of its business management and efficiency improvement initiatives ensured a steady gross margin of IoT PaaS business during the year. SaaS and others gross margin in 2022 was 79.0%, compared to 73.7% in 2021, mainly due to the changes in product mix of services. Smart device distribution gross margin in 2022 was 11.6%, compared to 14.9% in 2021. OPERATING EXPENSES Operating expenses decreased by 17.3% to US$257.6 million in 2022 from US$311.4 million in 2021. Non-GAAP operating expenses, defined as operating expenses excluding share-based compensation expenses, decreased by 23.1% to US$188.6 million in 2022 from US$245.3 million in 2021. Share-based compensation expenses in 2022 were US$69.0 million, compared to US$66.1 million in 2021. Research and development expenses in 2022 were US$144.9 million, down 16.8% from US$174.3 million in 2021, primarily because of the strategic streamlining of the Group's research and development team to drive operational efficiency and focus more on pursuing strategies of better balancing the business growth and timeline to profitability (but partially offset by the accompanying one-off additional cost of US$7.3 million relating to headcount optimization). The Group's total salaried research and development headcount as of December 31, 2022 was 1,313, down 48.7% compared to that of December 31, 2021. Sales and marketing expenses in 2022 were US$55.7 million, down 26.2% from US$75.4 million in 2021, primarily because of (i) the strategic streamlining of the sales and marketing team, and (ii) the decrease in marketing spending due to COVID-19 and the Group's efforts to control expenditures and improve sales and marketing efficiency. General and administrative expenses in 2022 were US$67.5 million, down 5.7% from US$71.6 million in the same period of 2021, primarily due to the Group's efforts to control professional expenditures and operating overheads, partially offset by the increase in share-based compensation expenses from US$44.8 million to US$47.5 million. Other operating incomes, net in 2022 were US$10.5 million, primarily due to the receipts of software VAT refunds and various general subsidies for enterprises. LOSS FROM OPERATIONS AND OPERATING MARGIN Loss from operations in 2022 narrowed by 8.4% to US$168.2 million from US$183.6 million in 2021. Non-GAAP loss from operations in 2022 narrowed by 15.6% to US$99.2 million from US$117.5 million in 2021. Operating margin in 2022 was negative 80.8%, down 20.0 percentage points from negative 60.8% in 2021. Non-GAAP operating margin in 2022 was negative 47.6%, down 8.7 percentage points from negative 38.9% in 2021. The changes in the operating margin are mainly because the Group's total revenue declined at a faster pace than operating expenses. NET LOSS AND NET MARGIN Net loss in 2022 narrowed by 16.7% to US$146.2 million from US$175.4 million in 2021. Non-GAAP net loss in 2022 was US$77.2 million, compared to US$109.3 million in the same period of 2021. The difference between loss from operations and net loss in 2022 was primarily because of a US$18.5 million financial income achieved mainly due to well implemented treasury strategies on the Group's cash and deposits recorded as short-term investment. Net margin in 2022 was negative 70.2%, down 12.1 percentage points from negative 58.1% in 2021, and Non-GAAP net margin in 2022 was negative 37.1%, basically flat compared to negative 36.2% in 2021, primarily due to the same reason as that of changes in operating margin. BASIC AND DILUTED NET LOSS PER ADS Basic and diluted net loss per ADS in 2022 were US$0.26, compared to US$0.36 in 2021. Each ADS represents one Class A ordinary share. Non-GAAP basic and diluted net loss per ADS in 2022 were US$0.14, compared to US$0.22 in 2021. NET CASH USED IN OPERATING ACTIVITIES Net cash used in operating activities for 2022 was US$70.7 million, or 33.9% of total revenue, compared to US$126.1 million of net cash used in operating activities, or 41.7% of total revenue in 2021. The net cash used in operating activities in 2022 decreased mainly due to the decrease in operating expenses, particularly employee related costs, and working capital changes in the ordinary course of business. Business Outlook The global consumer discretionary industry and consumer spending are still expected to continue to face a range of challenges in 2023, including, among other things, a decline or continued weakness in the general economic conditions, global high inflation, inventory backlog experienced by players such as smart device manufacturers, brands and retail channels in the supply chain, fluctuations in foreign exchange rates, and geopolitical tensions and conflicts, and competitions brought by technology iteration to the IoT industry. The Group will continue to make efforts to monitor the uncertainties caused by such challenges, and despite these challenges, the Group remains confident in its long-term growth prospects and stays committed to iterating its products and services, further enhancing its software and embedded hardware capabilities, expanding customer base, diversifying revenue streams, and further optimizing operating efficiency. Conference Call Information The Company's management will hold a conference call at 07:00 P.M. U.S. Eastern Time on Wednesday, March 1, 2023 (08:00 A.M. Beijing Time on Thursday, March 2, 2023) to discuss the financial results. In advance of the conference call, all participants must use the following link to complete the online registration process. Upon registering, each participant will receive access details for this conference including a conference access code, a PIN number (personal access code), the dial-in number, and an e-mail with detailed instructions to join the conference call. Online registration: https://www.netroadshow.com/events/login? show=aaaf2866&confId=47330 The replay will be accessible through March 8, 2023 by dialing the following numbers: International: +44-204-525-0658 United States: +1-929-458-6194 Access Code: 819491 A live and archived webcast of the conference call will also be available at the Company's investor relations website at https://ir.tuya.com. About Tuya Inc. Tuya Inc. (NYSE: TUYA; HKEX: 2391) is a global leading IoT cloud development platform with a mission to build an IoT developer ecosystem and enable everything to be smart. Tuya has pioneered a purpose-built IoT cloud development platform that delivers a full suite of offerings, including Platform-as-a-Service, or PaaS, and Software-as-a-Service, or SaaS, to businesses and developers. Through its IoT cloud development platform, Tuya has enabled developers to activate a vibrant IoT ecosystem of brands, OEMs, partners and end users to engage and communicate through a broad range of smart devices. Use of Non-GAAP Financial Measures In evaluating the business, the Company considers and uses non-GAAP measures, such as non-GAAP operating expenses, non-GAAP loss from operations (including non-GAAP operating margin), non-GAAP net loss (including non-GAAP net margin), and non-GAAP basic and diluted net loss per ADS, as supplemental measures to review and assess its operating performance. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). The Company defines non-GAAP measures excluding the impact of share-based compensation expenses from the respective GAAP measures. The Company presents the non-GAAP financial measures because they are used by the management to evaluate its operating performance and formulate business plans. The Company also believes that the use of the non-GAAP measures facilitates investors' assessment of its operating performance. Non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using the aforementioned non-GAAP financial measures is that they do not reflect all items of expenses that affect the Company's operations. Share-based compensation expenses have been and may continue to be incurred in the business and are not reflected in the presentation of non-GAAP financial measures. Further, the non-GAAP financial measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore their comparability may be limited. The Company compensates for these limitations by reconciling the non-GAAP financial measures to the nearest U.S. GAAP performance measures, all of which should be considered when evaluating the Company's performance. The Company encourages you to review its financial information in its entirety and not rely on a single financial measure. Reconciliations of Tuya's non-GAAP financial measures to the most comparable U.S. GAAP measures are included at the end of this press release. Safe Harbor Statement This press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the Company's beliefs, and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements can be identified by words or phrases such as "may", "will", "expect", "anticipate", "target", "aim", "estimate", "intend", "plan", "believe", "potential", "continue", "is/are likely to" or other similar expressions. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the SEC. The forward-looking statements included in this press release are only made as of the date hereof, and the Company disclaims any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Investor Relations Contact Tuya Inc.Investor RelationsEmail: ir@tuya.com The Blueshirt GroupGary Dvorchak, CFAPhone: +1 (323) 240-5796Email: gary@blueshirtgroup.com TUYA INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2021 AND 2022 (All amounts in US$ thousands ("US$"), except for share and per share data, unless otherwise noted) As of December 31, As of December 31, 2021 2022 ASSETS Current assets: Cash and cash equivalents 963,938 133,161 Restricted cash 638 – Short-term investments 102,134 821,134 Accounts receivable, net 32,701 12,172 Notes receivable 1,393 2,767 Inventories, net 62,582 45,380 Prepayments and other current assets 27,882 8,752 Total current assets 1,191,268 1,023,366 Non-current assets: Property, equipment and software, net 6,805 3,827 Operating lease right-of-use assets, net 22,181 9,736 Long-term investments 26,078 18,031 Other non-current assets 1,818 1,179 Total non-current assets 56,882 32,773 Total assets 1,248,150 1,056,139 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable 12,212 9,595 Advances from customers 31,088 27,633 Deferred revenue, current 9,254 6,821 Accruals and other current liabilities 50,847 33,383 Lease liabilities, current 5,697 3,850 Total current liabilities 109,098 81,282 Non-current liabilities: Lease liabilities, non-current 16,048 5,292 Deferred revenue, non-current 859 394 Other non-current liabilities 8,484 7,004 Total non-current liabilities 25,391 12,690 Total liabilities 134,489 93,972 TUYA INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) AS OF DECEMBER 31, 2021 AND 2022 (All amounts in US$ thousands ("US$"), except for share and per share data, unless otherwise noted) As of December 31, As of December 31, 2021 2022 Shareholders' equity: Ordinary shares – – Class A ordinary shares 25 25 Class B ordinary shares 4 4 Treasury stock (46,930) (86,438) Additional paid-in capital 1,526,140 1,584,764 Accumulated other comprehensive income/(loss) 2,320 (22,115) Accumulated deficit (367,898) (514,073) Total shareholders' equity 1,113,661 962,167 Total liabilities and shareholders' equity 1,248,150 1,056,139 TUYA INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (All amounts in US$ thousands ("US$"), except for share and per share data, unless otherwise noted) For the Three Months Ended For the Year Ended December 31, December 31, December 31, December 31, 2021 2022 2021 2022 Revenue 74,967 45,286 302,076 208,172 Cost of revenue (42,616) (25,100) (174,209) (118,749) Gross profit 32,351 20,186 127,867 89,423 Operating expenses: Research and development expenses (46,187) (27,792) (174,289) (144,942) Sales and marketing expenses (18,433) (11,203) (75,384) (55,662) General and administrative expenses (21,011) (16,181) (71,589) (67,513) Other operating incomes, net 1,724 2,160 9,835 10,508 Total operating expenses (83,907) (53,016) (311,427) (257,609) Loss from operations (51,556) (32,830) (183,560) (168,186) Other income/(loss) Other non-operating income, net 653 779 1,958 2,904 Financial income, net 2,619 10,234 7,286 18,546 Foreign exchange (loss)/gain, net (425) (102) (618) 2,441 Loss before income tax expense (48,709) (21,919) (174,934) (144,295) Income tax expense (135) (811) (490) (1,880) Net loss (48,844) (22,730) (175,424) (146,175) Net loss attributable to Tuya Inc. (48,844) (22,730) (175,424) (146,175) Net loss attribute to ordinary shareholders (48,844) (22,730) (175,424) (146,175) Net loss (48,844) (22,730) (175,424) (146,175) Other comprehensive income/(loss) Changes in fair value of long-term investments 357 (8,347) 357 (9,493) Foreign currency translation 1,211 2,090 1,482 (14,942) Total comprehensive loss attributable to Tuya Inc. (47,276) (28,987) (173,585) (170,610) TUYA INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (CONTINUED) (All amounts in US$ thousands ("US$"), except for share and per share data, unless otherwise noted) For the Three Months Ended For the Year Ended December 31, December 31, December 31, December 31, 2021 2022 2021 2022 Net loss attributable to Tuya Inc. (48,844) (22,730) (175,424) (146,175) Net loss attributable to ordinary shareholders (48,844) (22,730) (175,424) (146,175) Weighted average number of ordinary shares used in computing net loss per share, basic and diluted 562,082,216 554,121,595 489,149,533 553,527,529 Net loss per share attributable to ordinary shareholders, basic and diluted (0.09) (0.04) (0.36) (0.26) Share-based compensation expenses were included in: Research and development expenses 4,093 4,032 14,542 14,692 Sales and marketing expenses 1,634 1,611 6,702 6,825 General and administrative expenses 11,900 11,867 44,845 47,502 TUYA INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (All amounts in US$ thousands ("US$"), except for share and per share data, unless otherwise noted) For the Three Months Ended For the Year Ended December 31, 2021 December 31, 2022 December 31, 2021 December 31, 2022 Net cash used in operating activities (53,194) (138) (126,103) (70,654) Net cash generated from/(used in) investing activities 23,627 (165,305) (112,957) (714,225) Net cash (used in)/generated from financing activities (43,841) (3,432) 1,041,802 (38,582) Effect of exchange rate changes on cash and cash equivalents, restricted cash 2,433 2,138 2,879 (7,954) Net (decrease)/increase in cash and cash equivalents, restricted cash (70,975) (166,737) 805,621 (831,415) Cash and cash equivalents, restricted cash at the beginning of period 1,035,551 299,898 158,955 964,576 Cash and cash equivalents, restricted cash at the end of period 964,576 133,161 964,576 133,161 TUYA INC. UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO THE MOST DIRECTLY COMPARABLE FINANCIAL MEASURES (All amounts in US$ thousands ("US$"), except for share and per share data, unless otherwise noted) For the Three Months Ended For the Year Ended December 31, 2021 December 31, 2022 December 31, 2021 December 31, 2022 Reconciliation of operating expenses to non-GAAP operating expenses Research and development expenses (46,187) (27,792) (174,289) (144,942) Add: Share-based compensation expenses 4,093 4,032 14,542 14,692 Adjusted Research and development expenses (42,094) (23,760) (159,747) (130,250) Sales and marketing expenses (18,433) (11,203) (75,384) (55,662) Add: Share-based compensation expenses 1,634 1,611 6,702 6,825 Adjusted Sales and marketing expenses (16,799) (9,592) (68,682) (48,837) General and administrative expenses (21,011) (16,181) (71,589) (67,513) Add: Share-based compensation expenses 11,900 11,867 44,845 47,502 Adjusted General and administrative expenses (9,111) (4,314) (26,744) (20,011) Reconciliation of loss from operations to non-GAAP loss from operations Loss from operations (51,556) (32,830) (183,560) (168,186) Operating margin (68.8) % (72.5) % (60.8) % (80.8) % Add: Share-based compensation expenses 17,627 17,510 66,089 69,019 Non-GAAP Loss from operations (33,929) (15,320) (117,471) (99,167) Non-GAAP Operating margin (45.3) % (33.8) % (38.9) % (47.6) % Reconciliation of net loss to non-GAAP net loss Net loss (48,844) (22,730) (175,424) (146,175) Net margin (65.2) % (50.2) % (58.1) % (70.2) % Add: Share-based compensation expenses 17,627 17,510 66,089 69,019 Non-GAAP Net loss (31,217) (5,220) (109,335) (77,156) Non-GAAP Net margin (41.6) % (11.5) % (36.2) % (37.1) % Weighted average number of ordinary shares used in computing non-GAAP net loss per share, basic and diluted 562,082,216 554,121,595 489,149,533 553,527,529 Non-GAAP net loss per share attributable to ordinary shareholders, basic and diluted (0.06) (0.01) (0.22) (0.14)
HANGZHOU, China, Feb. 23, 2023 /PRNewswire/ -- Youdao, Inc. ("Youdao" or the "Company") (NYSE: DAO), a leading technology-focused intelligent learning company in China, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2022. Fourth Quarter 2022 Financial Highlights[1] Total net revenues were RMB1.5 billion (US$210.8 million), representing a 38.6% increase from the same period in 2021. - Net revenues from learning services were RMB806.3 million (US$116.9 million), representing a 39.2% increase from the same period in 2021. - Net revenues from smart devices were RMB407.0 million (US$59.0 million), representing a 28.1% increase from the same period in 2021. - Net revenues from online marketing services were RMB240.8 million (US$34.9 million), representing a 58.6% increase from the same period in 2021. Gross margin was 53.3%, compared with 42.5% for the same period in 2021. [1] As previously disclosed, in compliance with applicable regulatory requirements, the Company had ceased to offer the after-school tutoring services on academic subjects in China's compulsory education system (the "Academic AST Business") at the end of December 2021. The Academic AST Business met the criteria of discontinued operations. Retrospective adjustments to the historical statement of operations have also been made to provide a consistent basis of comparison for the financial results of the continuing operations. The financial information and non-GAAP financial information included in this press release are presented on a continuing operations basis, unless otherwise specifically stated. Fiscal Year 2022 Financial Highlights Total net revenues were RMB5.0 billion (US$726.8 million), representing a 24.8% increase from 2021. - Net revenues from learning services were RMB3.1 billion (US$447.2 million), representing a 26.3% increase from 2021. - Net revenues from smart devices were RMB1.3 billion (US$182.2 million), representing a 28.2% increase from 2021. - Net revenues from online marketing services were RMB672.4 million (US$97.5 million), representing a 13.2% increase from 2021. Gross margin was 51.6%, compared with 49.5% for 2021. "Our ongoing investment in AI technology facilitated our ability to consistently introduce and broaden our digital content services and smart device offerings throughout 2022. In both the third and fourth quarters, the net revenues from our digital content services covered its costs and operating expenses, showing the improved health of our business. Our new smart devices launched in the second half of 2022, including upgraded dictionary pens and smart learning pads, were highly recognized by customers, which led to strong sales growth during the November 11 Shopping Festival. As a result of the solid performance of our new services and smart devices, we achieved record-high net revenues and our first-ever income from operations in the fourth quarter. Our improved financial and operating indicators demonstrate that we have the right strategy in place to support our growth trajectory," said Dr. Feng Zhou, Chief Executive Officer and Director of Youdao. "Years of experience have taught us that the full value of AI cannot be realized on its own. To effectively support users, technologies must be integrated with sound business scenarios. Looking ahead, we will continue to prioritize our users. By leveraging our advanced technology and innovation, we will continue to introduce additional high-quality educational products and services to meet users' diverse and personalized demands." Dr. Zhou concluded. Fourth Quarter 2022 Financial Results Net Revenues Net revenues for the fourth quarter of 2022 were RMB1.5 billion (US$210.8 million), representing a 38.6% increase from RMB1.0 billion for the same period of 2021. Net revenues from learning services were RMB806.3 million (US$116.9 million) for the fourth quarter of 2022, representing a 39.2% increase from RMB579.3 million for the same period of 2021. The year-over-year growth was primarily driven by the strong sales performance from the new services initiated after the implementation of the "Double Reduction" Policy. Net revenues from smart devices were RMB407.0 million (US$59.0 million) for the fourth quarter of 2022, representing a 28.1% increase from RMB317.7 million for the same period of 2021, primarily driven by the popularity of Youdao's newly launched products, such as the Youdao Dictionary Pen X5. Net revenues from online marketing services were RMB240.8 million (US$34.9 million) for the fourth quarter of 2022, representing a 58.6% increase from RMB151.8 million for the same period of 2021. The year-over-year increase in revenues from online marketing services was mainly attributable to the increase in performance-based advertisements through third parties' internet properties. Gross Profit and Gross Margin Gross profit for the fourth quarter of 2022 was RMB774.7 million (US$112.3 million), representing a 74.0% increase from RMB445.3 million for the same period of 2021. Gross margin increased to 53.3% for the fourth quarter of 2022 from 42.5% for the same period of 2021. Gross margin for learning services increased to 64.1% for the fourth quarter of 2022 from 51.4% for the same period of 2021, primarily attributable to the significant increase in revenues, improved economics of scale and ongoing optimization of Youdao's faculty compensation structure. Gross margin for smart devices increased to 46.2% for the fourth quarter of 2022 from 30.8% for the same period of 2021. The improvement was mainly attributable to the popularity of Youdao's newly launched Youdao Dictionary Pen X5, which carries a higher gross margin than other products. Gross margin for online marketing services was 29.2% for the fourth quarter of 2022, compared with 32.6% for the same period of 2021. The decrease was mainly attributable to the increase in performance-based advertisements through third parties' internet properties, which typically have a lower gross margin profile. Operating Expenses Total operating expenses for the fourth quarter of 2022 were RMB750.0 million (US$108.7 million), compared with RMB693.6 million for the same period of last year. Sales and marketing expenses for the fourth quarter of 2022 were RMB515.9 million (US$74.8 million), representing an increase of 22.7% from RMB420.4 million for the same period of 2021. This increase was mainly driven by increasing sales and marketing efforts associated with Youdao's learning services and smart devices. Research and development expenses for the fourth quarter of 2022 were RMB179.5 million (US$26.0 million), representing an increase of 5.4% from RMB170.2 million for the same period of 2021. The increase was primarily due to higher payroll-related expenses associated with a larger number of development and technology professionals in smart devices. General and administrative expenses for the fourth quarter of 2022 were RMB54.6 million (US$7.9 million), representing an increase of 18.4% from RMB46.1 million for the same period of 2021. The increase was mainly attributable to an increase in employee related expenses in the fourth quarter of 2022. Impairment of intangible assets from business combination for the fourth quarter of 2021 reflected the impairment of the intangible assets related to a subsidiary acquired due to the adverse development of its business and change of the regulatory environment. (Loss)/Income from Operations As a result of the foregoing, income from operations for the fourth quarter of 2022 was RMB24.7 million (US$3.6 million), compared with loss from operations of RMB248.3 million for the same period in 2021. The margin of income from operations was 1.7%, compared with margin of loss from operations of 23.7% for the same period of last year. Net (Loss)/Income from Continuing Operations Attributable to Youdao's Ordinary Shareholders Net income from continuing operations attributable to Youdao's ordinary shareholders for the fourth quarter of 2022 was RMB12.3 million (US$1.8 million), compared with net loss from continuing operations attributable to Youdao's ordinary shareholders of RMB215.9 million for the same period of last year. Non-GAAP net income from continuing operations attributable to Youdao's ordinary shareholders for the fourth quarter of 2022 was RMB31.1 million (US$4.5 million), compared with Non-GAAP net loss from continuing operations attributable to Youdao's ordinary shareholders of RMB168.2 million for the same period of last year. Basic and diluted net income from continuing operations per American depositary share ("ADS") attributable to ordinary shareholders for the fourth quarter of 2022 was RMB0.10 (US$0.01), compared with basic and diluted net loss from continuing operations per ADS attributable to ordinary shareholders of RMB1.75 for the same period of 2021. Non-GAAP basic and diluted net income from continuing operations per ADS attributable to ordinary shareholders was RMB0.25 (US$0.04), compared with Non-GAAP basic and diluted net loss from continuing operations per ADS attributable to ordinary shareholders of RMB1.37 for the same period of 2021. Balance Sheet As of December 31, 2022, Youdao's cash, cash equivalents, restricted cash, time deposits and short-term investments totaled RMB1.0 billion (US$147.4 million), compared with RMB1.6 billion as of December 31, 2021. For the fourth quarter of 2022, net cash provided by continuing operating activities was RMB84.1 million (US$12.2 million), capital expenditures totaled RMB3.8 million (US$0.5 million), and depreciation and amortization expenses amounted to RMB11.7 million (US$1.7 million). Youdao's ability to continue as a going concern is dependent on management's ability to implement an effective business plan in future periods in light of the changing regulatory environment, generate operating cash flows and continue to be able to obtain outside sources of financing as necessary for Youdao's future development. As of the date of this release, Youdao has received various financial support from the NetEase Group, including, among others, RMB878.0 million short-term loans and US$80.0 million long-term loans with maturity dated March 31, 2024 drawn down under the US$300.0 million revolving loan facility. As of December 31, 2022, the Company's contract liabilities, which mainly consisted of deferred revenues generated from Youdao's learning services, were RMB1.1 billion (US$154.7 million), compared with RMB1.1 billion as of December 31, 2021. Fiscal Year 2022 Financial Results Net Revenues Net revenues for 2022 were RMB5.0 billion (US$726.8 million), representing a 24.8% increase from RMB4.0 billion for 2021. Net revenues from learning services were RMB3.1 billion (US$447.2 million) for 2022, representing a 26.3% increase from RMB2.4 billion for 2021. The increase was primarily driven by the strong sales performance from the new services initiated after the implementation of the "Double Reduction" Policy. Net revenues from smart devices were RMB1.3 billion (US$182.2 million) for 2022, representing a 28.2% increase from RMB980.4 million for 2021. The increase was primarily driven by the popularity of Youdao's newly launched products, such as the Youdao Dictionary Pen X5. Net revenues from online marketing services were RMB672.4 million (US$97.5 million) for 2022, representing a 13.2% increase from RMB593.9 million for 2021. The increase was attributable to the increase in the sales of performance-based advertisements through third parties' internet properties. Gross Profit and Gross Margin Gross profit for 2022 was RMB2.6 billion (US$375.0 million), compared with RMB2.0 billion for 2021. Gross margin for 2022 was 51.6%, compared with 49.5% for 2021. Gross margin for learning services increased to 62.0% for 2022 from 59.8% for 2021, primarily attributable to the significant increase in revenues, improved economics of scale and ongoing optimization of Youdao's faculty compensation structure. Gross margin for smart devices increased to 39.1% for 2022 from 36.9% for 2021, primarily attributable to the substantial rise in sales volume of Youdao Dictionary Pen X5, which carries a higher gross margin than other products. Gross margin for online marketing services was 27.4% for 2022, keeping flat with 28.1% for 2021. Operating Expenses Total operating expenses for 2022 were RMB3.4 billion (US$487.3 million), representing an increase of 14.6%, compared with RMB2.9 billion for 2021. Sales and marketing expenses for 2022 were RMB2.3 billion (US$337.5 million), representing an increase of 12.1%, compared with RMB2.1 billion for 2021. This increase was mainly driven by increasing sales and marketing efforts associated with Youdao's learning services and smart devices. Research and development expenses for 2022 were RMB803.8 million (US$116.5 million), representing an increase of 32.3%, compared with RMB607.4 million for 2021. The increase was primarily due to higher payroll-related expenses associated with a larger number of development and technology professionals in smart devices and education digitalization solutions. General and administrative expenses for 2022 were RMB229.2 million (US$33.2 million), representing an increase of 20.4%, compared with RMB190.3 million for 2021. The increase was mainly attributable to an increase in employee related expenses in 2022. Impairment of intangible assets from business combination for 2021 reflected the impairment of the intangible assets related to a subsidiary acquired due to the adverse development of its business and change of the regulatory environment. Loss from Operations Loss from operations for 2022 was RMB774.7 million (US$112.3 million), compared with RMB943.2 million for 2021. The margin of loss from operations was 15.5%, compared with 23.5% for 2021. Net Loss from Continuing Operations Attributable to Youdao's Ordinary Shareholders Net loss from continuing operations attributable to Youdao's ordinary shareholders for 2022 was RMB720.9 million (US$104.5 million), compared with RMB895.4 million for 2021. Non-GAAP net loss from continuing operations attributable to Youdao's ordinary shareholders for 2022 was RMB639.9 million (US$92.8 million), compared with RMB788.3 million for 2021. Basic and diluted net loss from continuing operations per ADS attributable to ordinary shareholders for 2022 was RMB5.83 (US$0.84), compared with RMB7.36 for 2021. Non-GAAP basic and diluted net loss from continuing operations per ADS attributable to ordinary shareholders was RMB5.18 (US$0.75), compared with RMB6.48 for 2021. Operating Cash Flow from Continuing Operations For 2022, net cash used in continuing operating activities was RMB531.4 million (US$77.0 million), capital expenditures totaled RMB69.8 million (US$10.1 million), and depreciation and amortization expenses amounted to RMB42.2 million (US$6.1 million). Share Repurchase Program On November 17, 2022, the Company announced that its board of directors had authorized the Company to adopt a share repurchase program in accordance with applicable laws and regulations for up to US$20 million of its Class A ordinary shares (including in the form of ADSs) during a period of up to 36 months. As of the date of this release, the Company accumulatively repurchased an aggregate of approximately 1.8 million ADSs for approximately US$10.0 million from the open market under the share repurchase program. Conference Call Youdao's management team will host a teleconference call with simultaneous webcast at 5:00 a.m. Eastern Time on Thursday, February 23, 2023 (Beijing/Hong Kong Time: 6:00 p.m., Thursday, February 23, 2023). Youdao's management will be on the call to discuss the financial results and answer questions. Dial-in details for the earnings conference call are as follows: United States (toll free): +1-888-346-8982 International: +1-412-902-4272 Mainland China (toll free): 400-120-1203 Hong Kong (toll free): 800-905-945 Hong Kong: +852-3018-4992 Conference ID: 8917789 A live and archived webcast of the conference call will be available on the Company's investor relations website at http://ir.youdao.com. A replay of the conference call will be accessible by phone one hour after the conclusion of the live call at the following numbers, until March 2, 2023: United States: +1-877-344-7529 International: +1-412-317-0088 Replay Access Code: 8917789 About Youdao, Inc. Youdao, Inc. (NYSE: DAO) is a leading technology-focused intelligent learning company in China dedicated to developing and using technologies to provide learning content, applications and solutions to users of all ages. Building on the popularity of its online knowledge tools such as Youdao Dictionary and Youdao Translation, Youdao now offers smart devices, STEAM courses, adult and vocational courses, and education digitalization solutions. In addition, Youdao has developed a variety of interactive learning apps. Youdao was founded in 2006 as part of NetEase, Inc. (NASDAQ: NTES; HKEX: 9999), a leading internet technology company in China. For more information, please visit: http://ir.youdao.com. Non-GAAP Measures Youdao considers and uses non-GAAP financial measures, such as non-GAAP net income/(loss) from continuing operations attributable to the Company's ordinary shareholders and non-GAAP basic and diluted income/(loss) from continuing operations per ADS, as supplemental metrics in reviewing and assessing its operating performance and formulating its business plan. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Youdao defines non-GAAP net income/(loss) from continuing operations attributable to the Company's ordinary shareholders as net income/(loss) from continuing operations attributable to the Company's ordinary shareholders excluding share-based compensation expenses, amortization of intangible assets from business combination, impairment of long-term investments, impairment of intangible assets from business combination, income tax effects of above GAAP to non-GAAP reconciling items, and adjustment for GAAP to non-GAAP reconciling items for the income/(loss) attributable to noncontrolling interests. Non-GAAP net income/(loss) from continuing operations attributable to the Company's shareholders enables Youdao's management to assess its operating results without considering the impact of these items, which are non-cash charges in nature. Youdao believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating the Company's current operating performance and prospects in the same manner as management does, if they so choose. Non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools, which possibly do not reflect all items of expense that affect our operations. In addition, the non-GAAP financial measures Youdao uses may differ from the non-GAAP measures uses by other companies, including peer companies, and therefore their comparability may be limited. For more information on these non-GAAP financial measures, please see the table captioned "Unaudited Reconciliation of GAAP and non-GAAP Results" set forth at the end of this release. The accompanying table has more details on the reconciliation between our GAAP financial measures that are mostly directly comparable to non-GAAP financial measures. Youdao encourages you to review its financial information in its entirety and not rely on a single financial measure. Exchange Rate Information This announcement contains translations of certain RMB amounts into U.S. dollars ("US$") at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB6.8972 to US$1.00, the exchange rate on December 30, 2022 set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all. Safe Harbor Statement This press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "target," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. The Company may also make written or oral forward-looking statements in its reports filed with, or furnished to, the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. Further information regarding such risks, uncertainties or factors is included in the Company's filings with the SEC. The announced results of the fourth quarter and full year of 2022 are preliminary and subject to audit adjustments. All information provided in this press release is as of the date of this press release, and the Company does not undertake any duty to update such information, except as required under applicable law. For investor and media inquiries, please contact: In China: Jeffrey WangYoudao, Inc.Tel: +86-10-8255-8163 ext. 89980E-mail: IR@rd.netease.com The Piacente Group, Inc.Emilie WuTel: +86-21-6039-8363E-mail: youdao@thepiacentegroup.com In the United States: The Piacente Group, Inc. Brandi PiacenteTel: +1-212-481-2050E-mail: youdao@thepiacentegroup.com YOUDAO, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (RMB and USD in thousands) As of December 31, As of December 31, As of December 31, 2021 2022 2022 RMB RMB USD (1) Assets Current assets: Cash and cash equivalents 322,777 783,611 113,613 Time deposits 268 273 40 Restricted cash 749,770 873 127 Short-term investments 503,831 232,152 33,659 Accounts receivable, net 248,339 405,139 58,740 Inventories, net 255,411 232,260 33,675 Amounts due from NetEase Group 6,192 7,888 1,144 Prepayment and other current assets 182,577 207,777 30,124 Assets held for sale 497 - - Total current assets 2,269,662 1,869,973 271,122 Non-current assets: Property, equipment and software, net 80,315 92,116 13,356 Operating lease right-of-use assets, net 118,104 78,405 11,368 Long-term investments 32,518 90,703 13,151 Goodwill 109,944 109,944 15,940 Other assets, net 22,436 35,015 5,075 Assets held for sale 1,088 - - Total non-current assets 364,405 406,183 58,890 Total assets 2,634,067 2,276,156 330,012 Liabilities, Mezzanine Equity and Shareholders' Deficit Current liabilities: Accounts payables 161,006 282,354 40,937 Payroll payable 277,383 266,340 38,616 Amounts due to NetEase Group 83,041 68,809 9,976 Contract liabilities 1,065,639 1,067,285 154,742 Taxes payable 53,323 50,908 7,381 Accrued liabilities and other payables 515,567 564,922 81,907 Short-term loans from NetEase Group 878,000 878,000 127,298 Total current liabilities 3,033,959 3,178,618 460,857 Non-current liabilities: Long-term lease liabilities 73,070 43,635 6,326 Long-term loans from NetEase Group 255,028 522,345 75,733 Other non-current liabilities 2,411 8,832 1,281 Total non-current liabilities 330,509 574,812 83,340 Total liabilities 3,364,468 3,753,430 544,197 Mezzanine equity 78,592 64,571 9,362 Shareholders' deficit: Youdao's shareholders' deficit (807,067) (1,535,089) (222,567) Noncontrolling interests (1,926) (6,756) (980) Total shareholders' deficit (808,993) (1,541,845) (223,547) Total liabilities, mezzanine equity and shareholders' deficit 2,634,067 2,276,156 330,012 Note 1:The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB6.8972 on the last trading day of December (December 30, 2022) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. YOUDAO, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (RMB and USD in thousands, except share and per ADS data) Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, December 31, 2021 2022 2022 2022 2021 2022 RMB RMB RMB USD (1) RMB RMB Net revenues: Learning services 579,259 888,493 806,270 116,899 2,441,421 3,084,375 Smart devices 317,702 356,480 406,956 59,003 980,424 1,256,446 Online marketing services 151,836 157,461 240,756 34,906 593,949 672,361 Total net revenues 1,048,797 1,402,434 1,453,982 210,808 4,015,794 5,013,182 Cost of revenues (2) (603,504) (642,254) (679,295) (98,489) (2,026,956) (2,426,766) Gross profit 445,293 760,180 774,687 112,319 1,988,838 2,586,416 Operating expenses: Sales and marketing expenses (2) (420,437) (709,769) (515,944) (74,805) (2,077,638) (2,328,095) Research and development expenses (2) (170,245) (212,926) (179,474) (26,021) (607,373) (803,791) General and administrative expenses (2) (46,112) (56,520) (54,597) (7,916) (190,297) (229,210) Impairment of intangible assets from business combination (56,778) - - - (56,778) - Total operating expenses (693,572) (979,215) (750,015) (108,742) (2,932,086) (3,361,096) (Loss)/Income from operations (248,279) (219,035) 24,672 3,577 (943,248) (774,680) Interest income 3,012 4,033 3,072 445 18,780 12,908 Interest expense (8,428) (12,277) (14,643) (2,123) (31,644) (45,607) Others, net 12,339 40,058 3,767 546 36,673 81,445 (Loss)/Income before tax (241,356) (187,221) 16,868 2,445 (919,439) (725,934) Income tax benefit/(expense) 556 1,108 (13,833) (2,006) (6,648) (13,844) Net (loss)/income from continuing operations (240,800) (186,113) 3,035 439 (926,087) (739,778) Net income/(loss) from discontinued operations 199,290 - - - (100,267) (6,105) Net (loss)/income (41,510) (186,113) 3,035 439 (1,026,354) (745,883) Net loss attributable to noncontrolling interests 24,897 2,194 9,263 1,343 30,699 18,851 Net (loss)/income attributable to ordinary shareholders of the Company (16,613) (183,919) 12,298 1,782 (995,655) (727,032) Including: Net (loss)/income from continuing operations attributable to ordinary shareholders of the Company (215,903) (183,919) 12,298 1,782 (895,388) (720,927) Net income/(loss) from discontinued operations attributable to ordinary shareholders of the Company 199,290 - - - (100,267) (6,105) Basic net (loss)/income per ADS (0.13) (1.49) 0.10 0.01 (8.18) (5.88) -Continuing operations (1.75) (1.49) 0.10 0.01 (7.36) (5.83) -Discontinued operations 1.62 - - - (0.82) (0.05) Diluted net (loss)/income per ADS (0.13) (1.49) 0.10 0.01 (8.18) (5.88) -Continuing operations (1.75) (1.49) 0.10 0.01 (7.36) (5.83) -Discontinued operations 1.62 - - - (0.82) (0.05) Shares used in computing basic net (loss)/income per ADS 123,193,273 123,767,013 123,584,460 123,584,460 121,650,907 123,597,604 Shares used in computing diluted net (loss)/income per ADS 123,193,273 123,767,013 124,345,717 124,345,717 121,650,907 123,597,604 Note 1:The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB6.8972 on the last trading day of December (December 30, 2022) as set forth in theH.10 statistical release of the U.S. Federal Reserve Board. Note 2: Share-based compensation in each category: Cost of revenues 3,249 798 1,231 178 7,862 5,984 Sales and marketing expenses 2,800 2,879 3,249 471 10,521 12,669 Research and development expenses 8,735 7,586 5,702 828 33,775 30,578 General and administrative expenses 5,449 4,801 6,845 992 20,043 21,478 YOUDAO, INC. UNAUDITED ADDITIONAL INFORMATION (RMB and USD in thousands) Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, December 31, 2021 2022 2022 2022 2021 2022 RMB RMB RMB USD RMB RMB Net revenues Learning services 579,259 888,493 806,270 116,899 2,441,421 3,084,375 Smart devices 317,702 356,480 406,956 59,003 980,424 1,256,446 Online marketing services 151,836 157,461 240,756 34,906 593,949 672,361 Total net revenues 1,048,797 1,402,434 1,453,982 210,808 4,015,794 5,013,182 Cost of revenues Learning services 281,433 315,086 289,829 42,021 980,700 1,172,703 Smart devices 219,703 212,365 218,969 31,748 618,925 765,641 Online marketing services 102,368 114,803 170,497 24,720 427,331 488,422 Total cost of revenues 603,504 642,254 679,295 98,489 2,026,956 2,426,766 Gross margin Learning services 51.4 % 64.5 % 64.1 % 64.1 % 59.8 % 62.0 % Smart devices 30.8 % 40.4 % 46.2 % 46.2 % 36.9 % 39.1 % Online marketing services 32.6 % 27.1 % 29.2 % 29.2 % 28.1 % 27.4 % Total gross margin 42.5 % 54.2 % 53.3 % 53.3 % 49.5 % 51.6 % YOUDAO, INC. UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS (RMB and USD in thousands, except per ADS data) Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, December 31, 2021 2022 2022 2022 2021 2022 RMB RMB RMB USD RMB RMB Net (loss)/income from continuing operations attributable to ordinary shareholders of the Company (215,903) (183,919) 12,298 1,782 (895,388) (720,927) Add: share-based compensation 20,233 16,064 17,027 2,469 72,201 70,709 amortization of intangible assets from business combination 1,976 - - - 2,972 - impairment of long-term investments - 3,500 1,800 261 7,000 10,300 impairment of intangible assets from business combination 56,778 - - - 56,778 - Less: tax effects on non-GAAP adjustments (8,813) - - - (8,962) - GAAP to non-GAAP reconciling items for the loss attributable to noncontrolling interests (22,473) - - - (22,854) - Non-GAAP net (loss)/income from continuing operations attributable toordinary shareholders of the Company (168,202) (164,355) 31,125 4,512 (788,253) (639,918) Non-GAAP basic net (loss)/income from continuing operations per ADS (1.37) (1.33) 0.25 0.04 (6.48) (5.18) Non-GAAP diluted net (loss)/income from continuing operations per ADS (1.37) (1.33) 0.25 0.04 (6.48) (5.18)
Preliminary Revenues Up 38% Year-on-Year Revenues of €425 million for FY2022, a 38% increase on FY 2021, exceeding previous guidance (1) All portfolio brands delivered growth, with flagship brand Lanvin growing 67% YoY Implementation of balanced global growth strategy resulted in 44% growth in EMEA, 36% growth in North America, and 13% growth in Greater China, despite COVID impact Successful delivery of omni-channel strategies drove a 42% increase in global Wholesale and a 35% increase in DTC sales Ongoing implementation of strategic plans in 2023 to drive further revenue growth and margin improvement NEW YORK, Feb. 17, 2023 /PRNewswire/ -- Lanvin Group (NYSE: LANV, the "Group"), a global luxury fashion group with Lanvin, Wolford, St. John, Sergio Rossi, and Caruso in its portfolio of brands, today announced its preliminary, unaudited revenues for the full-year 2022. The Group achieved revenues of €425 million, a 38% increase year-over-year versus 2021 and a 25% increase year-over-year versus 2021 on a pro forma basis assuming Sergio Rossi's full-year revenue results were included in 2021.(2) Joann Cheng, Chairman and CEO of Lanvin Group, said: "These strong preliminary revenue numbers are testament to the global growth strategy that we are delivering. The results reflected the culture of success and entrepreneurship we maintain within our organization and highlighted the reputation of our brands. Looking forward, notwithstanding current macroeconomic conditions, we remain optimistic for 2023, especially with the continued resurgence of the APAC region." Ms. Cheng continued: "2022 was an exciting year for Lanvin Group. We will continue to maintain the legacy and heritage of our iconic brands while adapting to the future and making sure that we evolve to continually exceed the expectations of our consumers. We remain committed to driving collaboration between our brands to further unleash value of our unique synergistic global platform." Review of the Full-Year 2022 Preliminary, Unaudited Revenues Lanvin Group Revenue by Brand (Euros in Thousands) 2022A Preliminary 2021AAudited Growth %2022A vs. 2021A Lanvin 121,313 72,872 +67 % Wolford 126,579 109,332 +16 % St. John 85,763 73,094 +17 % Sergio Rossi 61,929 28,737 +116 % Caruso 30,819 24,695 +25 % Total Brands 426,403 308,730 +38 % Eliminations (1,881) 92 Total Group 424,522 308,822 +38 % Selected Highlights Strong growth achieved in all brands: All five brands showed year-over-year growth, with differentiated brand strategies successfully implemented that have not only led to the strong results in 2022 but also laid out a solid foundation for further improvements in 2023 and beyond. Lanvin, the Group's flagship brand, grew global revenue by 67%, with record 145% growth in its Wholesale business, demonstrating the brand's increasing appeal and demand among global luxury retailers and buyers, especially for its accessory products. Its DTC business also grew by 39%, driven by the increased unit economics generated from its client engagement initiatives and digital strategy. Refocused brand and product strategies showing results: One of the main drivers of growth in 2022 was the refocus of brand strategies and optimization of product categories and mix. Not only did the brands introduce new capsules and product lines, but the refocus on core products and balancing the mix led to strong results. The Group's push into accessories proved a strong driver of growth and margin. Wolford's focus on iconic products and athleisure proved to be a winning combination; successful collaborations with GCDS, MUGLER, ALBERTA FERRETTI, and Sergio Rossi particularly paid off in attracting new clients. Caruso leveraged the "back to elegance" trend as people returned to the workplace. St. John reinforced its "American Luxury" moniker and focused its products to reflect the direction, which yielded strong results in core DTC channel and North American region. Lanvin further re-established its position as the iconic and oldest operating French couture house, while significantly boosting its attraction among younger consumers through accessory products including leather goods and sneakers. Omni-channel and digital strategies led to growth in all channels: Channel initiatives in 2022 expanded both DTC and Wholesale sales. In 2022, the Group's DTC revenues increased 35% from €187 million to €253 million; and wholesale revenues increased 42% from €116 million to €165 million. In Wholesale the brands drove business development by further penetrating their existing customer base and by developing new partners. In DTC, a deliberate focus on improving client engagement at the retail-level as well as on social media resulted in growing brand awareness and strong growth in unit economics. In 2022 the Group established a strong foundation for its retail footprint which provides a solid springboard for future retail expansion plans. Digital marketing likewise had a strong effect on the 2022 results with the brands increasingly attracting new and younger demographics. In the second half of 2022, the Group established a shared digital platform in North American powered by Shopify's innovative and agile digital solutions. Sergio Rossi and Lanvin have already successfully transitioned their North American eCommerce to this platform, which is expected to bring further growth to the brands in the coming years. Global development strategy resulted in balanced growth across regions: In 2022 the Group saw significant growth in all of its geographies. The Group's largest region, EMEA, showed the most robust results, growing from €148 million to €214 million, a 44% increase. North America also showed solid growth of 36% from €107 million to €145 million. Notwithstanding the prolonged Covid lockdowns, Greater China, grew 13% from €43 million to €48 million. This was a gratifying result given the brands' currently limited retail footprint and the early stage of the Group's growth and brand awareness in China. 2023 Outlook The Group will carry its strong momentum into 2023, but is aware of the macroeconomic issues, and therefore expects sustained but moderated growth with further positive contribution from the resurgence of the APAC region. At both Group and brand-level, ongoing initiatives are being implemented to drive improved margin profile. The Group will focus on client engagement by expanding its product categories, particularly in accessories; and by implementing further initiatives in branding and marketing. Conference Call As previously announced, today at 8:00AM EST/9:00PM CST/2:00PM CET, Lanvin Group will host a conference call to discuss its preliminary revenues for the full-year 2022 and provide an outlook for 2023. To participant in the conference call, please register by clicking on the following link: https://dpregister.com/sreg/10175603/f5e737e150 A live and recorded webcast of the conference call and a slide presentation will also be available on the Group's investor relations website at https://ir.lanvin-group.com/Events. Next Scheduled Announcement The next scheduled announcement will be the full-year 2022 earnings release in April 2023. To receive email alerts of the timing of future financial news releases, as well as future announcements, please register at https://ir.lanvin-group.com. ---------------------------------- Note: All % changes are calculated on an actual currency exchange rate basis. (1) Lanvin Group's previous guidance was published at the time of the announcement of the business combination between the Company and Primavera Capital Acquisition Corp. ("PCAC"). The guidance was also disclosed in the Company's registration statement on Form F-4 filed with the SEC (File No. 333-266095), under "Certain Unaudited Lanvin Group Prospective Financial Information". (2) Lanvin Group acquired a majority stake in Sergio Rossi in July 2021 and Sergio Rossi was consolidated into Lanvin Group's consolidated revenue starting from the acquisition date. Pro forma results reflect Sergio Rossi's full-year revenues for 2021 being included in calculating the growth rate. Appendix Lanvin Group Revenue by Brand: (Euros in Thousands) 2022A Preliminary 2021AAudited Growth %2022A vs. 2021A Lanvin 121,313 72,872 +67 % Wolford 126,579 109,332 +16 % St. John 85,763 73,094 +17 % Sergio Rossi 61,929 28,737 +116 % Caruso 30,819 24,695 +25 % Total Brands 426,403 308,730 +38 % Eliminations (1,881) 92 Total Group 424,522 308,822 +38 % Lanvin Group Revenue by Geography: (Euros in Thousands) 2022A Preliminary 2021AAudited Growth %2022A vs. 2021A EMEA 213,797 148,197 +44 % North America 144,624 106,701 +36 % Greater China 47,881 42,518 +13 % Other 18,220 11,406 +60 % Total 424,522 308,822 +38 % Lanvin Group Revenue by Channel: (Euros in Thousands) 2022A Preliminary 2021AAudited Growth %2022A vs.2021A DTC/eCommerce 252,799 186,813 +35 % Wholesale 165,286 116,417 +42 % Other 6,437 5,592 +15 % Total 424,522 308,822 +38 % About Lanvin Group Lanvin Group is a leading global luxury fashion group headquartered in Shanghai, China, managing iconic brands worldwide including Lanvin, Wolford, Sergio Rossi, St. John Knits, and Caruso. Harnessing the power of its unique strategic alliance of industry-leading partners in the luxury fashion sector, Lanvin Group strives to expand the global footprint of its portfolio brands and achieve sustainable growth through strategic investment and extensive operational know-how, combined with an intimate understanding and unparalleled access to the fastest-growing luxury fashion markets in the world. For more information about Lanvin Group, please visit www.lanvin-group.com, and to view our investor presentation, please visit https://ir.lanvin-group.com. Disclaimer The full-year 2022 revenues are preliminary and unaudited. The audit of the Group's financial statements will be finalized at the time of the Group's 2022 consolidated financial statements. These unaudited financial data are not a comprehensive statement of the Group's financial results for the year ended December 31, 2022 and should not be viewed as a substitute for the Group's full annual financial statements prepared in accordance with IFRS. These preliminary unaudited financial results are subject to revision in connection with the Group's financial closing procedures, including the review of such financial results by the Group's audit committee, and finalization and audit of the Group's consolidated financial statements for the year ended December 31, 2022. During the preparation of the Group's consolidated financial statements and related notes and the completion of the audit for the year ended December 31, 2022, additional adjustments to the preliminary estimated financial results presented above may be identified. Actual results for the period reported may differ from these preliminary results. Forward-Looking Statements This communication, including the section "2023 Outlook", contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "should," "would," "plan," "predict," "potential," "seem," "seek," "future," "outlook," "project" and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding estimates and forecasts of other financial and performance metrics and projections of market opportunity. These statements are based on various assumptions, whether or not identified in this communication, and on the current expectations of the respective management of Lanvin Group and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and must not be relied on by an investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of Lanvin Group. Potential risks and uncertainties that could cause the actual results to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, Lanvin Group's ability to timely complete its financial closing procedures and finalize its consolidated financial statements for fiscal year 2022; changes adversely affecting the business in which Lanvin Group is engaged; Lanvin Group's projected financial information, anticipated growth rate, profitability and market opportunity may not be an indication of its actual results or future results; management of growth; the impact of COVID-19 or similar public health crises on Lanvin Group's business; Lanvin Group's ability to safeguard the value, recognition and reputation of its brands and to identify and respond to new and changing customer preferences; the ability and desire of consumers to shop; Lanvin Group's ability to successfully implement its business strategies and plans; Lanvin Group's ability to effectively manage its advertising and marketing expenses and achieve desired impact; its ability to accurately forecast consumer demand; high levels of competition in the personal luxury products market; disruptions to Lanvin Group's distribution facilities or its distribution partners; Lanvin Group's ability to negotiate, maintain or renew its license agreements; Lanvin Group's ability to protect its intellectual property rights; Lanvin Group's ability to attract and retain qualified employees and preserve craftmanship skills; Lanvin Group's ability to develop and maintain effective internal controls; general economic conditions; the result of future financing efforts; and those factors discussed in the reports filed by Lanvin Group from time to time with the SEC. If any of these risks materialize or Lanvin Group's assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that Lanvin Group presently does not know, or that Lanvin Group currently believes are immaterial, that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect Lanvin Group's expectations, plans, or forecasts of future events and views as of the date of this communication. Lanvin Group anticipates that subsequent events and developments will cause Lanvin Group's assessments to change. However, while Lanvin Group may elect to update these forward-looking statements at some point in the future, Lanvin Group specifically disclaim any obligation to do so. These forward-looking statements should not be relied upon as representing Lanvin Group's assessments of any date subsequent to the date of this communication. Accordingly, reliance should not be placed upon the forward-looking statements. Enquiries: Media Lanvin Group Miya He+86 1861 081 1457miya.he@lanvin-group.com FGS Global Richard Barton+852 9301 2056 or +41 79 922 7892richard.barton@fgsglobal.com| Investors Lanvin Groupir@lanvin-group.com
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Earnings projections or forecasts
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